THE NEW GOVERNMENT ACCOUNTING SYSTEM MANUAL • Loans, interests, bonds issued, and other contributions for

specific purposes;
For Local Government Units • Development projects funded from the Share in the Internal
Revenue Collections; and
Chapter 1. INTRODUCTION • Such other special accounts which may be created by law or
ordinance.
Sec. 01. Objectives of the Manual. – The New Government Accounting System
Manual presents the basic policies and procedures; the new coding system and 4. Chart of Accounts and Account Codes. A new coding structure and a new
chart of accounts; the accounting books, reports/forms and financial statements, chart of accounts with a three-digit account numbering system shall be
and illustrative accounting entries to be adopted by all local government units adopted.
effective January 1, 2002. The objectives of the Manual are to prescribe the
following: 5. Books of Accounts. The Books of Accounts are as follows:

a) Uniform guidelines and procedures in accounting for government funds and 6. Journals
property; • Cash Receipts Journal (CRJ)
b) New coding structure and new chart of accounts; and • Cash Disbursements Journal (CDJ)
c) New accounting books, reports/forms, financial statements and accounting • Check Disbursements Journal (CKDJ)
entries. • General Journal (GJ)

Sec. 02. Coverage. – This Manual shall be used by all local government units 7. Ledgers
(LGUs). • General Ledger (GL)
• Subsidiary Ledgers, where applicable for:
Sec. 03. Legal Basis. – This Manual is prescribed by the Commission on Audit • Cash
pursuant to Article IX-D, Section 2 par. (2) of the 1987 Constitution of the Republic of • Receivables
the Philippines which provides that: • Inventories
• Investments
"The Commission on Audit shall have exclusive authority, subject to the • Property, Plant and Equipment
limitations in this Article, to define the scope of its audit and examination, establish • Liabilities
the techniques and methods required therefor, and promulgate accounting and • Income
auditing rules and regulations, including those for the prevention and disallowance • Expenses
of irregular, unnecessary, excessive, extravagant, or unconscionable expenditures,
or uses of government funds and properties". (underscoring supplied) 8. All the above records shall be maintained by the accounting unit of the
LGUs. However, treasurers and disbursing officers shall also maintain their
respective cash records such as:
Chapter 2. BASIC FEATURES AND POLICIES
• Cashbook – Cash in Treasury
Sec. 04. Basic Features and Policies. – The new government accounting system has • Cashbook – Cash in Bank
the following basic features and policies, to wit: • Cashbook – Cash Advances

1. Accrual Accounting. A modified accrual basis of accounting is used. Under
this method, all expenses shall be recognized when incurred. Income shall
be on accrual basis (e.g. Share from Internal Revenue Collections) except
for transactions where accrual basis is impractical (e.g. Market Fees) or
when other methods may be required by law.
9. The Treasurers/Collectors shall prepare the Report of Collections and
Deposits (RCD) daily and the Report of Accountability for Accountable
Forms (RAAF) monthly.
10. Financial Statements. The following statements shall be prepared:

2. One Fund Concept. This system adopts the one fund concept. 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. As required under Sections 308, 309
and 310 of the Local Government Code, separate books shall be maintained
for the General Fund, Special Education Fund and Trust Fund.
3. Special Accounts in the General Fund. Special accounts in the General
Fund complete with subsidiary ledgers, shall be maintained for the
following:
• Public utilities and other economic enterprises;
• Balance Sheet
• Statement of Income and Expenses
• Statement of Cash Flows
11. Notes to Financial Statements shall accompany the above statements.
12. Trial Balance. The two money-column trial balance shall be used.
13. Appropriations, Allotments and Obligations. Journal entry shall no longer be
prepared to record the appropriations, receipt of allotments and incurrence
of obligations. In lieu of this, separate registries shall be maintained by the
Accounting Unit to control the appropriations, allotments and obligations
for each of the four classes of expenditures, namely:

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• Registry of Appropriations, Allotments and Obligations –
Capital Outlay (RAAOCO)
• Registry of Appropriations, Allotments and Obligations –
Maintenance and Other Operating Expenses (RAAOMO)
• Registry of Appropriations, Allotments and Obligations –
Personal Services (RAAOPS)
• Registry of Appropriations, Allotments and Obligations –
Financial Expenses (RAAOFE).
14. Financial Expenses. Financial expenses such as bank charges, interest
expenses, commitment fees and other related expenses shall be separately
classified from Maintenance and Other Operating Expenses (MOOE).
15. Perpetual Inventory of Supplies and Materials. Supplies and materials
purchased for inventory purpose shall be recorded using the perpetual
inventory system. Regular purchases shall be coursed thru the inventory
account and issuances thereof shall be recorded as they take place except
those purchased out of petty cash fund which shall be for immediate use
and not for stock. Such case shall be charged immediately to the
appropriate expense accounts.
16. Valuation of Inventory. Cost of ending inventory of supplies and materials
shall be computed using the moving average method.
17. Maintenance of Supplies and Property, Plant and Equipment Ledger Cards.
The Accounting Unit shall maintain Supplies Ledger Cards by stock number
and Property, Plant and Equipment Ledger Cards by category of assets.
18. Construction of Assets. For assets under construction, the Construction
Period Theory shall be applied for costing purposes. Bonus paid to the
contractor for completing the work ahead of time shall be added to the
total cost of the project. Liquidated damages charged and paid for by the
contractor shall be deducted from the total cost of the asset. Any related
expenses incurred during the construction of the project, such as, license
fees, permit fees, clearance fees, etc. shall be capitalized.
19. Public Infrastructures. Public infrastructures are assets for use of the
general public, such as roads, bridges, waterways, railways, plazas,
monuments, etc. A Registry of Public Infrastructures (RPI) shall be
maintained according to classification to record all infrastructures for use of
the general public. The following are the Registries to be maintained,
classified by category of property, plant and equipment:
• Registry of Public Infrastructure – Bridges (RPIB)
• Registry of Public Infrastructure – Roads (RPIR)
• Registry of Public Infrastructure – Plazas, Monuments, etc.
(RPIP)
20. During construction these infrastructures shall be recorded in the books
under the account “Construction in Progress”. Upon completion, the
completed asset shall be transferred to the account “Public Infrastructure”.
At the end of the year, completed assets under “Public Infrastructure” shall
be transferred to the respective registry.
21. Completed public infrastructures funded out of a loan shall, however, be
retained in the books of accounts until the loan is fully paid.
22. A Summary of all Public Infrastructures (based on the different registries)
shall be prepared annually and included in the Notes to Financial
Statements.
23. Depreciation. The straight-line method of depreciation shall be used. A
residual value equivalent to ten percent (10%) of the cost shall be set-up
and depreciation shall start on the second month after
purchase/completion of the property, plant and equipment. Public
infrastructures shall not be charged any depreciation.
24. Reclassification of Obsolete and Unserviceable Assets, as well as Assets No
Longer Used by the Agency to “Other Assets” Account. Assets declared by
proper authorities as obsolete and unserviceable, including assets of the
agency no longer used, shall be reclassified to “Other Assets” account from
the corresponding inventory and property, plant and equipment accounts.
25. Allowance for Doubtful Accounts. An Allowance for Doubtful Accounts shall
be set up for estimated uncollectible receivables. This will allow for a fair
valuation of receivables. Allowance for Doubtful Accounts shall be provided
only for trade receivables.
26. Elimination of Contingent Accounts. Contingent accounts shall no longer be
used. All financial transactions shall be recorded using the appropriate
accounts. Cash shortages and disallowed payments shall be recorded under
receivable accounts “Due From Officers and Employees” and
“Receivables– Disallowances/Charges”, as the case may be.
27. Recognition of Liability. Liability shall be recognized at the time goods and
services are accepted or rendered and supplier/creditor bills are received.
28. Interest Accrual. Whenever applicable and appropriate, interest income
and/or expense shall be accrued and recognized in the books of accounts.
29. Accounting for Borrowings and Loans. All borrowings and loans incurred
shall be recorded direct to the appropriate liability accounts.
30. Elimination of corollary and negative entries. The use of corollary and
negative entries shall be stopped. Acquisition/Disposition of assets shall be
debited/credited direct to the appropriate asset accounts. If an error is
committed, a correcting entry shall be prepared to adjust the original entry.
Chapter 3. ACCOUNTING SYSTEM
A. GENERAL ACCOUNTING PLAN
Sec. 05. General Accounting Plan. – The General Accounting Plan shows the
overall accounting cycle in the Local Government Unit. Transactions shall emanate
from the different offices/departments of the local government units (LGUs). These
offices/departments will provide/produce the source documents and other
accounting forms leading to the perfection of the transaction, whether it be
budgetary, collections or disbursements. The source documents and accounting
forms shall be the basis for the preparation of reports by the Office of the Treasurer.
The Office of the Accountant shall record the transactions to the registries or to the
corresponding books of original entry. Posting to the books of final entry and
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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:

1) Appropriations, Allotments and Obligations

2) Collections and Deposits
3) Disbursements –
a) By cash
b) By check
4) 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.

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 Sec. 11. Accounting Procedures for Budgetary Accounts. – Summarized
the local government unit shall be recorded in the Registry of Appropriations, hereunder is the process in accounting for budgetary accounts:
Allotments and Obligations (RAAO). The appropriations, in the amounts approved by
the legislative body and confirmed by the reviewing authorities, are recorded in the PROCESS PERSON / UNIT
registries maintained by the accountant where they may be compared with the RESPONSIBLE
actual developments of the period.
a) Records in the appropriate RAAOs Office of the
Budgetary reserves which are stand by appropriations ready for release in case of the approved appropriation per Accountant
calamities, as well as supplemental budget are similarly recorded in the RAAO. In Appropriation Ordinance.
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 b) Forwards the advice of allotments to Office of the Budget
adjustments shall be made in the registry. the Office of the Accountant and returns Officer
the work plan to the concerned
Separate registries shall be maintained for the four classes of expenditures per departments/ offices.
responsibility center, to wit:

1. Registry of Appropriations, Allotments and Obligations - Capital Outlays

(RAAOCO) c) Enters the allotments in the RAAOs. Office of the
2. Registry of Appropriations, Allotments and Obligations - Maintenance and Accountant
Other Operating Expenses (RAAOMO)
3. Registry of Appropriations, Allotments and Obligations - Personal Services d) Prepares ALOBS based on Heads of
(RAAOPS) disbursement vouchers/purchase departments/offices
4. Registry of Appropriations, Allotments and Obligations - Financial Expenses requests and/or supporting documents.
(RAAOFE) Signs the appropriate box for requesting
office. Forwards the same to the Office of
the Budget Officer.
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 e) Certifies the ALOBS as to the Budget Officer
incur obligations, for specified amounts, within the appropriation ordinance. existence of appropriations based on the
Allotments are released quarterly based on the Work and Financial Plan and Request appropriation ordinance. Assigns ALOBS
for Release of Allotment. The Accountant, upon receipt of the Advice of Allotment, number and forwards the same to the
shall enter the allotment in the RAAOs. Office of the Accountant.

Sec. 09. Accounting for Obligations. – Obligations refer to the amounts f) Certifies the ALOBS as to the Chief Accountant
committed to be paid by the LGU for any lawful act made by an accountable officer obligations of allotments. Records the
for and in behalf of the local government unit concerned. obligation in the appropriate column of
the RAAOs and in the Status of Obligation
Obligations shall be taken up in the registries as they are incurred. For each portion (Obligation) of the ALOBS.
obligation, the requesting department/office shall prepare the Allotment and
Obligation Slip (ALOBS) signed by the department or office head as requesting g) Records paid disbursement vouchers Office of the
official and forward this, together with the supporting documents, to the Budget in the Status of Obligation portion Accountant
Officer. (Payments) of the ALOBS. Any balance
appearing in the ALOBS after full payment
The Budget Officer shall certify to the existence of appropriation that has been of obligations shall form part of
legally made for the purpose by signing the appropriate box in the ALOBS and unobligated allotment. Adjust accordingly
assign the ALOBS number thereto. The Accountant shall review the ALOBS and the amount of recorded obligations in the
certify as to obligation of the allotment by signing the appropriate box in the ALOBS. RAAOs.
He shall also fill up the Status of Obligation. The Accountant shall record the amount
of obligation in the RAAOs. h) At the end of each month, reconcile Budget Officer and
records on allotments available for Chief Accountant
Sec. 10. Adjustment of Obligations. – The Chief Accountant shall record paid obligation.
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 Sec. 12. Terminology and Classification. – A common terminology and
of unobligated allotment. The Chief Accountant shall adjust accordingly the amount classification shall be used consistently throughout the budget, the accounts and the
of recorded obligations in the RAAO using the same ALOBS number as reference. At financial reports.
the end of each month, the Chief Accountant and the Budget Officer shall reconcile
their records on allotments available for obligation.

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For this purpose, the following specific expenditures shall be recorded in the • Bank Charges
appropriate RAAOs: • Interest Expenses
• Commitment Charges
a. RAAOCO – • Other Financial Charges (e.g. underwriting fees, guarantee
• Investments outlay (e.g. stocks, bonds) fees)
• Land, Land Improvements and Leasehold Improvements outlay • Loan Amortization
• 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, C. INCOME/COLLECTIONS AND DEPOSITS
bridges etc.)
• Furniture and Fixtures outlay Sec. 13. Separation of Books and Depository Accounts. – Local accountants
• Work Animals outlay and treasurers shall maintain separate books and depository accounts, respectively,
• Breeding stocks for each fund in their custody or administration.
• Machineries and Equipment outlay (e.g. dump trucks, construction
equipment, industrial machineries, technical and scientific Sec. 14. Depository Accounts. – Local treasurer shall maintain depository
equipment, etc.) accounts in the name of their respective local government units with banks,
• Aircrafts, Trains and Motor Vehicles outlay (e.g. motorcycles, cars, preferably government-owned, located in or nearest to their respective areas of
vans, etc.) jurisdiction. Earnings of its depository accounts shall accrue exclusively thereto.
• Artesian Wells, Reservoirs, Pumping Stations and Conduits outlay
Sec. 15. Remittance of Government Monies to the Local Treasury. – Officers
• Books outlay
of the local government authorized to receive and collect monies arising from taxes,
• Ordnance outlay revenue, or receipts of any kind shall remit the full amount received and collected to
• IT Equipment and Software outlay the treasury of such local government unit which shall be credited to the particular
• Other Property, Plant and Equipment outlay account or accounts to which the monies in question properly belong.
• Reforestation Projects
• Arts, Archeological Specimen and Other Exhibits Sec. 16. Sources of Income of LGUs. – The main sources of income of LGUs
are as follows:
b. RAAOPS –
• Salaries and Wages (e.g. regular pay, part-time pay, overtime and a. Tax revenues, fees and charges
night pay, holiday pay, etc.) b. Share from Internal Revenue Collections
• Allowances (e.g. PERA, hazard pay, RATA, etc.) c. Share from National Wealth
• Benefits (e.g. bonus, cash gifts, productivity, pension, etc.)
• Government Shares on Employees’ Contributions The sources of income are further classified into general income accounts and
specific income accounts.
c. RAAOMO –
• Subsidies (e.g. Subsidy to LGUs, Subsidy to Other Funds, etc.) Sec. 17. General Income Accounts. – The following shall comprise the General
Income Accounts applicable to LGUs:
• Livestock (e.g. swine, hogs, chicken, goats, etc.)
• Crops
a. Subsidy from Other LGUs
• Supplies (e.g. office, medical, dental and laboratories, spare parts, b. Subsidy from Other Funds
gasoline and oil, etc.) c. Subsidy from Special Accounts
• Repairs and Maintenance d. Sales Revenue
• Printing and Binding e. Dividend Income
• Travel f. Interest Income
• Consultancy g. Gain on Sale of Securities
• Light, Water and Gas h. Gain on Sale of Assets
• Communication (e.g. telephone, telegraph, internet, postage, etc.) i. Sale of Confiscated Goods and Properties
• Auditing Services j. Foreign Exchange (FOREX) Gains
• Other Services (e.g. janitorial, security, hauling, etc.) k. Miscellaneous Operating and Service Income
• Extraordinary and Miscellaneous Expenses l. Fines and Penalties – Government Services and Business
Operations
• All other expenditures in the Chart of Accounts for MOOE, except m. Income from Grants and Donations
depreciation, obsolescence, bad debts, loss on sale of assets, loss
of assets, discount on Real Property Tax and Special Education Sec. 18. Specific Income Accounts. – The following major classification comprise
Tax. the specific income accounts for LGUs:

d. RAAOFE – 1. Property Taxes

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 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 of Funding Check Issued has been received from
DBM.
b. Modified Accrual – Modified accrual
method of accounting shall be used for real property taxes. At the
beginning of the year, Real Property Tax Receivable and Special
Education Tax Receivable shall be established. This is in view of
the need to record in the books not mere income estimates from
real property taxes but actual receivables from said taxes.
However, to avoid appropriating uncollected revenues which might
result to huge cash overdraft, the same shall be credited to
Deferred Real Property Taxes Income/Deferred Special Education
Tax Income. Real Property Tax Income/Special Education Tax
Income shall be recognized upon receipt of collection.
c. Cash Basis – Cash basis of accounting
shall be used for all other taxes, fees, charges and other revenues.
Sec. 20. Basis of Recording Real Property Tax/Special Education Tax. – Real
Property Tax Receivables/Special Education Tax Receivables shall be established at
the beginning of the year based on Real Property Tax Account Register/Taxpayer’s
index card. At the beginning of the year, the Treasurer shall furnish the Chief
Accountant of a duly certified list showing the name of taxpayers and the amount
due and collectible for the year. Based on the list, the Chief Accountant shall draw a
Journal Entry Voucher (JEV) to record the debit to Real Property Tax
Receivable/Special Education Tax Receivable and crediting to Deferred Real
Property Tax Income/Deferred Special Education Tax Income.
Upon collection of Real Property Taxes from taxpayers, the account Deferred Real
Property Tax Income/Deferred Special Education Tax Income shall be debited while
the Real Property Tax Income due to the municipality is recognized/credited. The
share of the Province and Barangay shall also be credited to Due to LGUs.
Every end of the week, thereafter the Municipal Accountant shall furnish the
Provincial Accountant with a summary of the JEVs showing the breakdown of the
amounts Due to LGUs. The summary, which shall be supported with copies of the
JEVs, shall be the basis of the Provincial Accountant to draw the JEV taking up the
RPT Income. The account Due from LGU shall be debited and Real Property Tax
Income credited.
At the end of the month, the Municipal Accountant shall likewise prepare the
Abstract of Real Property Tax to facilitate the distribution of real property tax
collection. A copy of the abstract shall be furnished the Provincial Accountant, for
purposes of reconciliation with the weekly summary of JEVs.
Sec. 21. Delinquencies for Real Property Tax/Special Education Tax Prior
to CY 2002. – Payment of delinquencies for real property taxes/special education
taxes prior to CY 2002 shall be recognized as a direct credit to Real Property Tax
Income/Special Education Tax Income account.
Sec. 22. Discount on Real Property Tax/Special Education Tax. – Discounts
for advance and prompt payment of Real Property Tax and the additional one
percent (1%) tax accruing to the Special Education Fun shall be recognized in the
year the taxes are due. Said discounts shall be apportioned to the concerned LGUs
in accordance with the sharing prescribed for real property tax and additional one
percent (1%) tax under the Local Government Code.
Sec. 23. Fines and Penalties. – Fines and Penalties, either from tax revenue or
other specific income, shall be recognized as income of the year it was collected.
Fines and Penalties arising from real property taxes shall be distributed to
concerned LGUs in accordance with the sharing prescribed under the Local
Government Code for Real Property Tax and the additional one percent (1%) tax for
the Special Education Fund.
Sec. 24. Other Receipts. – Other receipts of the local government units shall be
comprised of, but not limited to, the following:
a. 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 of repayable obligations,
generally with interest from the bank, national agency, another local government
unit, and private sector. All borrowings incurred shall be recorded direct to the
appropriate liability accounts. Upon receipt of the advice from the bank or lending
agency informing the release of the proceeds, the Accountant shall draw a Journal of
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
be credited upon transfer of ownership.
Sec. 27. Refund of Cash Advances. – Cash advances for official travel shall be
taken up as a receivable from the concerned official or employee. Refunds made
shall be credited to the receivable account previously set up. Cash advances for
salaries and wages shall be recorded as debits to the account Cash – Disbursing
Officer. Any refund made shall be credited to this account.
Sec. 28. Receipt of Performance Bonds. – Performance bond posted by
contractor or supplier to guaranty full and faithful performance of the their work
may be in the form of cash, certified check or surety. Performance bond in cash or
certified check shall be acknowledged by the issuance of official receipt and
recorded in the books by the Accountant drawing a JEV for the purpose. In case of
surety bond, an acknowledgment receipt shall be issued by the authorized official.
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Sec. 29. Reporting for Collections and Deposits. – Collectors/tellers shall issue
a receipt to acknowledge collections made. The receipt maybe in the form of pre-
numbered Official Receipts, or cash tickets and the like. At the close of each
business day, these collectors/tellers shall accomplish the Report of Collections and
Deposits (RCD) in four copies. The original and two copies, together with the
duplicates of the official receipts issued, shall be submitted to the treasurer/cashier
to whom the cash collected shall be turned over. The fourth copy of the RCD shall
be retained by the collector/teller concerned. Barangay Treasurers deputized to
collect taxes imposed by provinces, cities and municipalities shall follow the same
procedures in turning over their collections to the treasurer/cashier concerned.
In the case of collectors assigned to the field, where travel time from their
places of assignment to the Treasurer’s Office is more than one day, turnover of
collections shall be made at least once a week or as soon as the collections reach
P5,000.00.
Sec. 30. Verification of Collections and Accountable Forms. – The
Treasurer/Cashier shall verify the Report of Collections and Deposits; check the
statement of accountable forms as to initial balances on hand, receipts, issues and
the ending balances on hand; make a physical count of the accountable forms
remaining in the custody of the collector/teller and check the same against the new
balances on hand column. He shall indicate his verification by affixing his signature
at the back of the triplicate copy of the last official receipt issued. He shall count the
money turned over to him and sign the certification and receipt portion of all copies
of RCD.
The barangay treasurer shall deposit all collections intact with the city/municipal
treasurer, or in a depository bank account maintained in the name of the barangay,
within five (5) days from receipt thereof.
Sec. 33. Deposit of Field Collections. – Collections by field collectors shall be
remitted to the Cashier or designated liquidating officer of the field office of the LGU.
When travel distance of the field office to the local treasury may expose government
funds to the risk of loss while in transit, the Cashier or designated liquidating officer,
upon authorization by the Treasurer, may deposit the collections in the authorized
depository bank near the field office of the LGU. The procedures in reporting
collections and deposits prescribed in this Chapter shall be observed.
Sec. 34. Accounting for Collections and Deposits. – The Accountant
shall determine the account classification of the collections covered by the RCD and
the supporting papers submitted by the Treasurer/Cashier and shall accomplish the
Journal Entry Voucher. The accountant shall also maintain the Abstract of Real
Property Tax Collections to facilitate the distribution and remittance of the shares of
the different government units concerned in the real property tax collections.
Sec. 35. Receipts and Collection Process. – The following is a summary of the
receipt and collection process in the LGU:
PROCESS PERSON / UNIT
RESPONSIBLE

Sec. 31. Designation of Liquidating Officers. – The Treasurer may designate Receive payment from taxpayers/ creditors Collector/Teller
liquidating officers from among the collectors/tellers whenever necessary. and issue Official Receipt (OR). Prepare
Report of Collections and Deposits. Remit to
a. Collector the Liquidating Officer (if one is designated)
s/tellers shall turn over their collections to their designated liquidating or Treasurer.
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 Check remittances and verifies accountable Liquidating Officer
by the collector/teller. forms of collectors/tellers. Consolidates
collections and remits to the
b. The Treasurer/Cashier. Prepares RCD.
liquidating officer shall perform the procedures for the receipt and
verification of collections turned over to him. He shall also accomplish Receive remitted collections, consolidates the Treasurer
the RCD in four copies to summarize the collections turned over to him same and prepares RCD. Records in the
by the collectors/tellers as well as his own collections. Cashbook – Cash in Treasury.

c. The Deposit collections in the appropriate bank Treasurer

liquidating officer shall turn over intact the cash collections to the account per authorized depository bank.
Treasurer/Cashier together with the originals and two copies of the Records deposit in the Cashbook – Cash in
RCDs of collectors/tellers and the duplicates of the official receipts Bank.
issued. The Treasurer/Cashier shall acknowledge receipt of the cash
and all accompanying documents by signing all copies of the RCD of Forward RCD to Accounting Unit with copies of Treasurer
liquidating officer on the certification and receipt portion of the form. ORs and validated deposit slips.
The fourth copy of the RCD of the liquidating officer and RCDs of
collectors/tellers shall be retained by the liquidating officer.
Prepare Journal of Entry Voucher and record in Accountant
Sec. 32. Deposit of Collections. – The Treasurer/Cashier shall deposit intact all the Cash Receipt Journal.
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 Sec. 36. Pro–forma Accounting Entries. – The following are pro-forma
shall record all deposits made in the cashbook and prepare the RCD. accounting entries for income, collection and deposit:

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 Acct Acct
Particulars Account Title . Debit Credi Particulars Account Title . Debit Credi
Cod t Cod t
e e
Receipts from 783 90
INCOME Markets 772 10
Garbage Fees
1. Real Property Tax – Basic
A. Books of the b. Deposit of Cash in Bank – LCCA 110 100
Municipality Collections Cash in Treasury 101 100

a. Setting-up of RPT Real Property Tax

Receivable Receivable 124 1,000 3. Share from Internal Revenue Collections
RPT = P1,000 Deferred Real
RPT Sharing: Municipal Property Tax Income 448 1,000 a. Receipt of Notice of Cash in Bank –LCCA 110 1,000
- 40% Funding Check Issued Share from Internal
Province - 35% from the DBM and Revenue Collections 746 1,000
Barangay - 25% credit memo from
the bank for Share
b. Receipt of Cash in Treasury 101 100 from Internal Revenue
Payment Real Property Tax Collections
Receivable 124 100
b. Receipt of Notice of Due from NGAs 130 1,000
c. Distribution of Deferred Real Funding Check Issued Share from Internal
Collection Property Tax Income 448 100 from the DBM for Revenue Collections 746 1,000
RPT Sharing: Real Property Tax 711 40 Share from Internal
Municipal - 40% Due to LGUs 431 60 Revenue Collections
Province - 35%
Barangay - 25% 4. Grants and Donations

d. Deposit of Cash in Bank – LCCA 110 100 a. Receipt of grants Cash in Treasury 101 100
Collections Cash in Treasury 101 100 and donations in cash Income from Grants
(Donations in kind shall and Donations 651 100
e. Remittance of Due to LGUs 431 35 be booked-up using the
Share (Province) Cash in Bank – LCCA 110 35 appropriate asset
account)
f. Remittance of Share Due to LGUs 431 25
(Barangay) Cash in Bank – LCCA 110 25
b. Receipt of grants Motor Vehicles 218 800
and donations in kind - Invested Equity 537 800
B. Books of the Motor Vehicle:
Province Original Cost (At the end of Year)
P1,000 Invested Equity 537 800
a. Upon receipt of the Due from LGUs 131 35 Less: Acc. Depn.
Summary of the JEV Real Property Tax 711 35 200
from the Municipal Book Value P Government Equity 501 800
Accountant 800

b. Upon receipt of Cash in Bank – LCCA 110 35

share Due from LGUs 131 35 5. BORROWINGS

a. Receipt of borrowed Cash in Bank –LCCA 110 1,000

2. Operating and Service Income funds from bank - Loans Payable –
Principal - Current, Domestic 403 1,000
a. Receipt of Income Cash in Treasury 101 100 P1,000 Bank Charges 951 10
Interest Expenses 952 12

8
 Acct Acct
Particulars Account Title . Debit Credi Particulars Account Title . Debit Credi
Cod t Cod t
e e
Bank Charges - Cash in Bank –LCCA 110 22
10 Receipt of subsidy Cash in Bank – LCCA 110 500
Interest Expense- from Subsidy from Special
12 General Fund Proper
Accounts 606 500

b. Receipt of borrowed Cash in Treasury 101 1,000

funds from other Loans Payable – 7. REFUND OF CASH ADVANCES
agency - Current, domestic 403 1,000
Principal - Interest Expenses 952 6 a. Cash Advance by an Officer for Local Travel
P1,000
Interest Expense - Cash in Bank – LCCA 110 6 a. To take up the cash Due from Officers &
6 advance Employees 128 10
Cash in Bank – LCCA 110 10
c. Payment of loan Loans Payable –
amortization Current, Domestic 403 200 b. To take up refund of Cash in Treasury 101 10
Cash in Bank - LCCA 110 200 cash advance Due from Officers &
Employees 128 10

6. SUBSIDIES
b. Cash Advance by a Disbursing Officer for Salaries and Wages
a. Subsidy from Other Funds (General Fund to Special Education
Fund) a. To take up the cash Cash – Disbursing
advance Officers 107 10
GENERAL FUND BOOKS Cash in Bank – LCCA 110 10

Transfer of subsidy Subsidy to Other 897 500

to Special Education Funds 110 500 b. To take up refund of Cash in Treasury 101 10
Fund (Aid to SEF to Cash in Bank – LCCA cash advance Cash – Disbursing
finance its projects) Officers 107 10

SPECIAL EDUCATION FUND BOOKS 8. RECEIPT OF CASH BONDS

Receipt of subsidy Cash in Treasury 101 500 a. To take up receipt of Cash in Treasury 101 50
funds from Other funds Subsidy from Other performance bond in Performance/
Funds 605 500 cash Bidders/ Bail Bonds 414 50
Payable

b. To take up deposit Cash in Bank – LCCA 110 50

of performance bond Cash in Treasury 101 50

b. Special Accounts (subsidy from General Fund proper to c. To take up refund of Performance/
Operation of Public Market) performance bond Bidders/ Bail Bonds 414 50
Payable
BOOKS OF GENERAL FUND PROPER Cash in Bank – LCCA 110 50

Transfer of subsidy to Subsidy to Special

Special Account Accounts 898 500
Cash in Bank – LCCA 110 500 D. DISBURSEMENTS

Sec. 37. Disbursements. – Disbursements refer to the settlement of government

BOOKS OF SPECIAL ACCOUNT (OPERATION OF PUBLIC MARKET) payables/obligations by cash or by check.

9
 Sec. 43. Reporting of Checks Issued. – The checks released to claimants shall
Typical transactions for which disbursements are made are as follows: 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
1. Personal Services of Journal of Entry Voucher based on individual checks issued and recording in the
2. Maintenance and Other Operating Expenses Check Disbursements Journal.
3. Capital Outlay
4. Financial Expenses Sec. 44. Check Disbursement Process. – The steps in disbursements through
issuance of check is shown below:
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 PROCESS PERSON / UNIT
be an integral part of the DV. RESPONSIBLE

Sec. 38. Certification on Disbursements. – Disbursements from the general a. Gather supporting Concerned Office
fund shall require the following certifications on the DV: documents, and approved ALOBS,
prepare DV and forward to Head
1. Certification and approval of vouchers and payrolls as to validity, propriety of Department.
and legality of the claim (Box A of DV) by the head of the department or
office who has administrative control of the fund concerned. In case of b. Sign Box A of DV and Supervisor/Head of
temporary absence or incapacity of the department head or chief of office, submit to the Accounting Unit. Department
the officer next-in-rank shall automatically perform his function and shall be
fully responsible therefor. c. Check completeness of Accounting Unit
documents, assign number to
2. Necessary documents supporting the disbursement vouchers and payrolls DV, sign Box B and forward to
as certified to and reviewed by the Accountant. (Box B of DV) Treasurer.

3. Certification that funds are available for the purpose by the Local d. Verify claim, certify Treasurer
Treasurer. (Box C of DV) cash availability (Box C) and
forward to approving officer.
Sec. 39. Approval of Disbursements. – Approval of disbursements by the Local
Chief Executive (LCE) himself shall be required whenever local funds are disbursed, Note: If funds are not available,
except for regularly recurring administrative expenses such as: payrolls for regular return to Accountant for
or permanent employees, expenses for light, water, telephone and telegraph recording in the books as
services, remittances to government creditor agencies such as GSIS, BIR, Accounts Payable (AP). For AP,
PHILHEALTH, LBP, DBP, NPO, PS of the DBM and others, where the authority to JEV shall be prepared by
approve may be delegated. Disbursement vouchers for expenditures appropriated Accounting Unit and JEV
for the operation of the Sanggunian shall be approved by the provincial Vice number reflected in the DV.
Governor, the city Vice Mayor or the municipal Vice Mayor, as the case may be. JEV for AP is recorded in
General Journal. Accountant
Sec. 40. Payments by Check. – Checks shall be drawn only on duly approved retains copy of DV and
disbursement vouchers. It shall be drawn by the local Treasurer and countersigned forwards to Treasurer.
by the local Administrator. In case of temporary absence or incapacity of the
aforesaid officials, these duties shall devolve upon their immediate assistants. In e. Approve transaction Local Chief Executive
the case of municipalities where no Administrator has been appointed, checks shall (Box D) and forward DV to or authorized
be countersigned by the municipal Mayor. In case, however, of expenditures Cashier. approving officer
appropriated for the operation of the Sanggunian, checks drawn shall be
countersigned by the provincial Vice Governor, the city Vice Mayor, or the municipal f. Prepare, sign check Treasurer
Vice Mayor, as the case may be. and forward check with DV to
countersigning officer.
Sec. 41. Recording Check Disbursements in the Cashbooks. – All checks
issued including cancelled checks shall be recorded chronologically in the Cashbook g. Countersign check and Administrator/ Vice-
– Cash in Bank. forward to Accountant for Mayor
preparation of the for the Local
Sec. 42. Release of Checks. – The Treasurer shall release the check only to the Accountant’s Advice of Local Sanggunian
payee or his duly authorized representative. For purposes of releasing checks, the Check Disbursements. Disbursements
Treasurer shall maintain a Check Register where all checks issued shall be recorded
chronologically and where the claimants shall be required to acknowledge receipt h. Prepare Accountant’s Accountant
thereof. Advice of Local Check
Disbursements and submit to

10
 PROCESS PERSON / UNIT Sec. 48. Payments out of the Petty Cash Fund. – Petty cash fund shall be
RESPONSIBLE maintained under the imprest system. The fund shall be sufficient for the non-
bank. Return DV, check and recurring, emergency and petty expenses of the LGU for one month. Disbursements
supporting documents to from the fund shall be through the Petty Cash Voucher (PCV) which shall be signed
Cashier/Treasurer. by the payee to acknowledge the amount received. The official receipt shall be
attached to the PCV.
i. Record check in the Treasurer
Check Register and release Petty cash fund shall be set up at the beginning of the year. An ALOBS shall be
check to claimant. Record prepared for the fund, recorded in the RAAO and obligated as Other Expenses.
disbursement in Cashbook –
Cash in Bank. Prepare Report Payments out of the fund shall be made through the use of PCVs duly supported by
of Checks Issued. Forward RCI official receipts and other required documents. Each PCV shall not exceed
with DV and supporting Php1,000.00.
documents to Accounting Unit.
A Disbursement Voucher shall be prepared for replenishments of the petty cash fund
j. Prepare the JEV Accounting Unit during the year duly supported by a list/summary of PCVs, the PCVs and its
based on individual supporting documents. ALOBS shall be prepared for each replenishment and
checks/voucher; sign recorded in the RAAO based on actual expenses incurred.
“Prepared By” portion
(approved by Chief At the end of the year, the petty cash fund shall be fully liquidated by preparing a
Accountant), and record JEV in Report of Disbursement supported by the list/summary of PCVs, the PCVs and its
the Check Disbursements supporting documents. The ALOBS setting up the fund at the beginning of the year
Journal. Post monthly to the shall be cancelled. Another ALOBS shall be prepared taking up the liquidation and
General Ledger/Subsidiary recorded in the RAAO based on the actual expenses incurred. Unused cash shall be
Ledgers. returned to the Treasurer who shall issue an Official Receipt to acknowledge the
amount returned. A new Cash Advance for Petty Cash Fund shall be set up in the
k. Forward RCI, DV, Accountant ensuing year.
supporting documents and JEV
to the Office of the Auditor. Sec. 49. Cash Disbursement Process. – Disbursement process for payment of
salaries and wages out of cash advances is as follows:
Sec. 45. Payments in Cash. – Disbursements by cash shall be made from a cash
advance drawn and maintained in accordance with COA rules and regulations. Cash PROCESS PERSON / UNIT
payments shall be made only on duly approved payrolls/disbursement vouchers. RESPONSIBLE
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, a) Processing of Payrolls to be paid Concerned offices
Current Account (LCCA). by cash is the same as that of
steps (a) to (e) for check
Sec. 46. Reporting of Cash Disbursements. – To account for cash disbursements.
disbursements, from regular and special cash advances, the Accountable/Disbursing
Officer shall prepare the Report of Disbursements and submit the original and b) Gather duly certified and approved Office of the
duplicate copy with vouchers/payrolls/petty cash vouchers to the Accountant. He payrolls to be paid out of cash Treasurer
shall ensure that receipt of the report and supporting documents, are properly advance. Prepare DV for cash
acknowledged by the Accountant. The Accountant shall verify the report including advance corresponding to the net
the completeness of the supporting documents, prepare the Journal of Entry amount of payroll/s. Sign Box A of
Voucher (JEV) and record the transaction in the Cash Disbursements Journal. DV and submit to the Accounting
Unit.
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 c) Check completeness of Accounting Unit
Bank – Local Currency, Current Account. documents/ previous cash advance
liquidated, assign number to DV,
For liquidation of travel where the amount of cash advance is equal to or more than sign Box B and forward to
the travel expenses incurred, the Liquidation Report form shall be prepared by the Approving Officer.
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 d) Approves DV and forward to Local Chief Executive
less than the travel expenses incurred, a Disbursement Voucher shall be prepared to Treasurer for preparation of
liquidate the previous cash advance and serve as a claim for reimbursement of the checks.
deficiency in amount.

11
 PROCESS
e) Prepare and sign check, and
forward check with DV to
countersigning officer.
f) Countersign check and forward to
Accountant for preparation of
Advice.
g) Prepare Accountant’s Advice of
Local Check Disbursements and
return DV, check and supporting
documents to Cashier/Treasurer.
h) Encash check and pay claimants.
Record disbursement in Cashbook
– Cash Advances.
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. Record
the refund as credit to cash
advance and attach OR to the
Cashbook – Cash Advances.
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.
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.
l) Forward Report of Disbursement
and supporting documents
including JEV to the Office of the
Auditor.
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.
PERSON / UNIT Property, plant and equipment acquired through purchase shall include all costs
RESPONSIBLE 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
Treasurer 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
Administrator concerned, like buildings, while public infrastructures are those to be used by the
general public. The construction period theory shall be used in recording both types
of assets. This means that expenses such as license fees and bonus paid to
contractor for completing the work ahead of schedule, etc. during the construction
Accountant 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
Treasurer/ Disbursing taken up in the books as "Construction in Progress” with the appropriate asset
Officer classification. As soon as the project is completed, the Construction in Progress for
agency asset is closed to the appropriate asset account.
Disbursing Officer For public infrastructures funded out of regular income, the Construction in Progress
account is transferred to the Public Infrastructures account upon completion. At the
end of the year, the latter account is closed to the Government Equity and the asset
is recorded in the Registry of Public Infrastructures (RPI). However, completed public
infrastructures funded out of a loan shall be closed to the Government Equity
account only upon full payment of the loan. A disclosure of public infrastructures
completed funded from loans shall be made in the Notes to Financial Statements.
Sec. 51. Purchase of Supplies. – Purchase of supplies and materials for stock
regardless of whether or not they are consumed within the accounting period shall
be recorded as assets using the Inventory account following the Perpetual Inventory
Disbursing Officer 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:
Acct
.
Accountant Cod
Particulars Account Title e Debit Credit
1. Payment through Cash Advances
a. Cash advance for personal services
Accountant Enter obligation in RAAOPS for P18,000 Salaries and Wages, P5,000
Additional Compensation, and P3,000 Personnel Economic Relief Allowance
(PERA).
1. Grant of cash Cash – Disbursing
advance for payroll Officers 107 21,000
Cash in Bank – LCCA 110 21,000
2. Liquidation of cash Salaries and Wages
12
 Acct Acct
. .
Cod Cod
Particulars Account Title e Debit Credit Particulars Account Title e Debit Credit
advance for payroll – Regular Pay 801 18,000 Office Supplies
PERA 804 3,000 Expenses 849 4,000
Additional Petty Cash Fund 105 5,000
Compensation 805 5,000
Withholding Taxes
Payable 410 2,000
GSIS Payable 411 1,500 Cancel RAAOMO for setting up of petty cash fund at the start of the year
PAG-IBIG Payable 412 1,500 and refund for a total of P6,000.
Cash – Disbursing
Officers 107 21,000 4. Return of unused Cash in Treasury 101 1,000
Petty Cash Fund. Petty Cash Fund 105 1,000

Enter obligation in RAAOPS for P1,500 Life and Retirement Insurance

Contributions and P1,500 PAG-IBIG Contributions. c. Cash advance for travel

3. Government share Life and Retirement Enter obligation in RAAOMO for Travel of P1,000
for life and retirement Insurance
insurance and PAG- Contributions 817 1,500 1. Grant of cash Due from Officers
IBIG Contributions PAG-IBIG advance and Employees 128 1,000
Contributions 818 1,500 Cash in Bank – LCCA 110 1,000
GSIS Payable 411 1,500
PAG-IBIG Payable 412 1,500 2. Liquidation of cash Traveling Expenses
advance during the – Local 831 900
current year Due from Officers
b. Petty Cash Fund (assuming only P900 and Employees 128 900
was utilized and P100
For establishment of fund, Enter obligation in RAAOMO as Other Expenses was refunded)
for P6,000

1. Release of cash Petty Cash Fund 105 6,000 Adjust RAAOMO for refund of cash advance of P100
advance for petty cash Cash in Bank – LCCA 110 6,000
fund miscellaneous 3. For amount Cash in Bank – LCCA 110 100
expenses refunded where official Due from Officers
receipt was issued and Employees 128 100

Enter obligation in RAAOMO for Office Supplies P2,500, Travelling Expenses

P500, Office Equipment Maintenance P1,000 and Other Expenses of P800. 2. Payment by Check

2. Replenishment of Traveling Expenses a. Maintenance and Other Operating Expenses

petty cash fund during – Local 831 500
the year Office Supplies Enter obligation in RAAOMO for rent P3,000
Expenses 849 2,500
Office Equipment 1. Payment of rent Rent Expense 841 3,000
Maintenance 882 1,000 Cash in Bank – LCCA 110 3,000
Other Expenses 950 800
Cash in Bank – LCCA 110 4,800
Enter obligation in RAAOMO for electricity of P1,500 and telephone/internet
of P2,000
Enter obligation in RAAOMO for Office Supplies P4,000 and Traveling
Expenses of P1,000. 2. Payment of utilities Electricity 835 1,500
(MERALCO and PLDT) Telephone/Telegrap
3. Liquidation at year Traveling Expenses h and Internet 837 2,000
end – Local 831 1,000 Cash in Bank – LCCA 110 3,500

13
 Acct Acct
. .
Cod Cod
Particulars Account Title e Debit Credit Particulars Account Title e Debit Credit
Cash in Bank – LCCA 110 360,000

3. Remittance of Withholding Taxes

Enter obligation in RAAOMO for training and seminar expenses of P1,000 taxes withheld Payable 410 80,000
Cash in Bank – LCCA 110 80,000
3. Payment of Training and
seminar fee Seminar Expenses 833 1,000
Cash in Bank – LCCA 110 1,000 If funded from regular agency income –

4. To take up roads Public Infrastructure 243 800,00

b. Financial Expenses completed Construction in 0
Progress – Roads,
Enter obligation in RAAOFE for bank charges of P300 Highways and
Bridges 232 800,000
1. Bank charges upon Bank Charges 951 300
receipt of bank Cash in Bank – LCCA 110 300 5. To transfer Government Equity 501 800,00
statement completed roads to Public 243 0 800,000
Registry of Public Infrastructures
Infra- structures at the
Enter obligation in RAAOFE for interest expense of P400 end of the year

2. Interest Expense Interest Expenses 952 400

Cash in Bank – LCCA 110 400 Note: Using the JEV for the above transactions, the public infrastructures
shall be recorded in the Registry of Public Infrastructures.

c. Office Equipment – Enter obligation in RAAOCO for P6,000 for purchase

of equipment If funded from a
loan –
1. Issuance of PO to No entry
dealer 6 To record Public 243 800,00
completed Infrastructures 0
2. Receipt of office Office Equipment 222 6,000 roads Construction in
equipment Cash in Bank – LCCA 110 6,000 Progress – Roads,
Highways and
Bridges 232 800,000
d. Construction of Roads by Contract – Enter obligation in RAAOCO for
P800,000 for construction of road. At year end,upon Government Equity 501 800,00
1. Payment of first Construction in full payment of laon Public 243 0 800,000
billing for 50% Progress – Roads, – Infrastructures
accomplishment Highways and
Bridges 232 400,00
0 e. General Repair/Construction of Building by Administration
Withholding Taxes
Payable 410 40,000 1. Approval of the No entry
Cash in Bank – LCCA 110 360,000 project P1M

2. Payment of second Construction in

billing 100% Progress – Roads, Enter obligation in RAAOCO for P600,000 for construction materials
accomplishment Highways and
Bridges 232 400,00
0
Withholding Taxes
Payable 410 40,000

14
 Acct Acct
. .
Cod Cod
Particulars Account Title e Debit Credit Particulars Account Title e Debit Credit
2. Issue PO for No Entry Payable 410 200,000
building materials: Cash in Bank – LCCA 110 1.8M
Lumber, nails, cement,
sand and gravel,
paints, etc. =
P600,000

2. Remittance of Withholding taxes

3. Payment for Construction withholding tax Payable 410 200,00
construction materials Materials Inventory 156 600,00 0
received Withholding Taxes 0 Cash in Bank – LCCA 110 200,000
Payable 410 60,000
Cash in Bank – LCCA 110 540,000
g. Land and Building
4. Issuance of Construction in
materials P590,000 Progress – Agency Enter obligation in RAAOCO for P600,000 for land and P400,000 for
Assets 230 590,00 building
0
Construction 1. Payment of the Land 201 600,00
Materials Inventory 156 590,000 land and building Building 204 0
(assessed value of Withholding Taxes 410 400,00 100,000
land is P600,000) for Payable 0
Enter obligation in RAAOCO for P380,000 for labor P1,000,000 Cash in Bank – LCCA 110 900,000

5. Cash advance Cash – Disbursing 2. Remittance of Withholding Taxes

granted to Disbursing Officers 107 350,00 withholding tax Payable 410 100,00
Officer for payroll Cash in Bank – LCCA 110 0 350,000 Cash in Bank – LCCA 110 0 100,000

6. Liquidation by Construction in
Disbursing Officer of Progress – Agency h. Purchase of Inventories
paid payroll Assets 230 380,00
0 Enter obligation in RAAOMO for purchase of P2,500 worth of spare arts
Withholding Taxes
Payable 410 30,000 1. Payment of Spare Parts 155 2,500
Cash – Disbursing delivered spare parts Inventory
Officers 107 350,000 Withholding Taxes 410 250
Payable
7. Remittance of Withholding Taxes 410 30,000 Cash in Bank – LCCA 110 2,250
withholding tax Payable
Cash in Bank – LCCA 110 30,000
i. Enter obligation in RAAOMO for purchase of office supplies
8. Accomplishment Buildings 204 970,00
Report approved by Construction in 0 1. Payment of office Office Supplies
the LCE Progress – Agency supplies delivered Inventory 149 3,000
Assets 230 970,000 Withholding Taxes
Payable 410 300
Cash in Bank – LCCA 110 2,700
f. Acquisition of Land

Enter obligation in RAAOCO for P2million for purchase of land j. Fund Transfers

1. Payment made for Land 201 2M Enter obligation in RAAOMO for subsidy to LGU – XYZ
land purchased Withholding Taxes

15
 Acct 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
Cod the Chief Accountant who shall draw a JEV to record the transaction. The loss shall
Particulars Account Title e Debit Credit be debited to the Loss of Assets account and credited to the appropriate receivable
1. Cash assistance to Subsidy to Local account. In case the request for relief is denied, immediate payment of the shortage
LGU –XYZ Government Units 895 30,000 shall be demanded from the accountable officer. Restitution shall be acknowledged
Cash in Bank – LCCA 110 30,000 by the issuance of an official receipt.

In case the request for relief from accountability for loss of property caused by fire,
k. Enter obligation in RAAOMO for subsidy to SEF 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
1. Cash transfer to Subsidy to Other be debited to the Loss of Assets account and credited to the appropriate asset
SEF as subsidy Funds 897 10,000 account. If request for relief from accountability is denied, the loss shall be taken up
Cash in Bank – LCCA 110 10,000 as a receivable from the accountable officer/persons liable and shall be credited to
the appropriate asset account.

l. Enter obligation in RAAOMO for grants and donation to Trust Fund 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
1. Cash transfer to Grants and 889 500,00 government and an official receipt shall be issued by the collector/teller. The cash
Trust Fund as Donations 110 0 500,000 overage shall be taken up as Other Specific Income.
counterpart LGU Cash in Bank – LCCA
funds. 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.

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 of cash and property may be due to
malversation, theft, robbery or other causes.
Cash shortage discovered during cash examination conducted by auditors is
reported through the Report of Cash Examination within ten (10) working days from
the completion of examination pursuant to COA Memorandum No. 84-373A. The
auditor issues an audit report in case of shortage in property accountability. As soon
as a shortage is definitely established, the Auditor shall issue a memorandum
pertaining thereto and the Accountant shall draw a Journal of Entry Voucher to take
up the shortage as a receivable from the accountable officer concerned.
In case of loss of property due to other causes (theft, force majeure, fire, etc.), a
report thereon shall be prepared by the accountable officer concerned for purposes
of requesting relief from accountability. No accounting entry shall be made but the
loss shall be disclosed in the notes to financial statements pending result of request
for relief from accountability.
Upon receipt of the debit memo and the dishonored check(s) from the bank,
constructive cancellation of the official receipt covering the dishonored check shall
be immediately effected by the Treasurer on the copy in his possession. The
Treasurer shall immediately photocopy the dishonored checks and record as credit
in the Cashbook–Cash in Bank and cancel payment in the taxpayer’s index card. He
shall also notify the collector/teller of the dishonor and the cancellation of the official
receipt. The collector/teller shall note the cancellation in the triplicate copies of the
receipt. The Treasurer shall then inform the Auditor who shall effect the cancellation
in the duplicate copy of official receipt, in case the same has already been
submitted for audit.
The Treasurer shall forward the debit memo and the photocopy of the dishonored
checks to the Accountant. The Accountant shall cancel the official receipt if still in
his possession. He shall prepare the Journal of Entry Voucher (JEV) taking up the
dishonored check by crediting the Cash in Bank account and debiting the
appropriate income account. In case of dishonor of check payments for Real
Property Tax (RPT) or Special Education Tax (SET), the RPT/SET Receivables and
corresponding Deferred RPT/SET Income shall be restored. The accounts Due to
LGUs, RPT Income, Cash in Bank and RPT Discount shall be adjusted accordingly. He
shall furnish the Treasurer with a copy of the duly approved JEV. The Treasurer shall
record the JEV number in the Cashbook-Cash in Bank as reference in the entry
effecting the cancellation of the dishonored check.
Sec. 58. Cancellation of Lost Check Issued. – A check is considered lost when it
is misplaced, waylaid or left behind inadvertently/negligently by the payee or holder
in due course or by the custodian/carrier thereof and after diligent search cannot be
found or located; or when it is lost due to fortuitous event, theft or robbery.
Upon submission of sworn statement from the payee that a check issued by
the LGU is lost, the treasurer shall immediately notify the bank concerned for the
stoppage of payment. He shall forward the sworn statement to the accountant who
shall prepare the JEV to cancel the payment made. Copy of the JEV shall be
furnished the treasurer as basis for him to debit the amount in the Cashbook – Cash
in Bank.

16
 Acct
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, Cod Credi
defaced or with erasures/errors affecting the genuineness of any material Particulars Account Title e Debit t
information contained therein.
1. Cash Shortage
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 a. Cash shortage of the of the Disbursing Officer
stale, the Treasurer shall send a written notice to the payee of the existence of the
check. To take up cash Due from Officers
shortage and Employees 128 50
A spoiled or stale check shall be marked cancelled on its face and reported as Cash – Disbursing
follows: Officers 107 50

1. For spoiled checks which are immediately

cancelled and for which the Report of Checks Issued (RCI) has not yet b. Cash Shortage of the Treasurer
been prepared, the cancelled check shall be attached to the RCI and
reported chronologically with the other checks issued and the word To take up cash Due from Officers
“Cancelled” shall be indicated on the report. shortage and Employees 128 50
Cash in Treasury 101 50
2. For stale checks which have been unclaimed
and thus, the original DV and supporting documents are still with the
Treasurer, the cancelled check shall be presented in the RCI after the 2. Grant of Relief from Accountability for Loss of Government
last check issued for the period indicated in the report. The original DV Funds
and supporting documents shall be returned to the Accountant who
shall prepare a JEV to record the transaction as Accounts Payable. To record the loss of Due from Officers
fund by a Disbursing and Employees 128 50
3. For checks which became spoiled or stale in Officer (allegedly thru Cash – Disbursing
the hands of the payee and which require replacement, a new check theft ) = P50 Officers 107 50
may be issued upon submission of the spoiled or stale check to the
Treasurer. A certified copy of the DV shall be requested from the To take up relief from Loss of Assets
Auditor for presentation to the Administrator/Local Chief Executive who accountability (current year) or
shall countersign the check. The cancelled check shall be reported and Prior Years’
attached to the RCI prepared at the period of cancellation. The adjustments (prior 948 50
replacement check shall also be reported chronologically in the RCI. years)
Due from Officers
Sec. 60. Suspensions, Disallowances and Charges. – Disallowances and and Employees 128 50
charges shall be taken up in the books of accounts only when they become final and
executory. The Accountant shall prepare the Journal of Entry Voucher (JEV) to take
up the Receivable – Disallowances and Charges and credit the appropriate expense
account for the current year or prior years’ adjustment if pertaining to expenses of 3. Cash Settlement in case of denial of Request for Relief from
previous years. Accountability

Cash settlement of disallowances shall be recorded thru the JEV by debiting Cash in To take up Cash in Treasury 101 50
Treasury and crediting the Receivable – Disallowances and Charges account. payment/settlement Due from Officers
and Employees 128 50
Suspensions in audit and settlement thereof shall not be recorded in the books of
accounts.
4. Cash Overage
Sec. 61. Pro-forma Accounting Entries. – The following the are pro-forma
accounting entries for miscellaneous transactions: To take up cash Cash in Treasury 101 50
overage discovered Other Specific
during cash Income of LGU 792 50
examination

5. Dishonored Checks

17
 Acct Acct
. .
Cod Credi Cod Credi
Particulars Account Title e Debit t Particulars Account Title e Debit t
When the Receivables –
From payment of real property tax in the current year or prior year disallowance becomes Disallowances/
final and executor Charges 138 10
Upon receipt of advice Real Property Tax Prior Years’
of dishonored check Receivable 124 50 Adjustments 533 10
and cancellation of Deferred Real
Official Receipt Property Tax
Income 448 50 Settlement of Cash in Treasury 101 10
disallowance Receivables –
Due to LGUs 431 30 Disallowances/
Real Property Tax Charges 138 10
Income 711 20
Cash in Bank – LCCA 110 50
c. Settlement of Charges
Receipt of Cash in Treasury 101 50
refund/settlement Real Property Tax c.1 Recording of charges which collection were made in the current
Receivable 124 50 year

When the charge

6. Lost/Destroyed/Stale/Obsolete Checks becomes final and Receivables –
executory – Disallowances/
Check issued in the current/prior year for replacement Underpayment of Charges 138 10
Franchise Tax Franchise Tax 724 10
Check cancellation Cash in Bank – LCCA 110 50 Amount Paid - P 100
Accounts Payable 401 50 Should be - 110
Charge - 10
Replacement Accounts Payable 401 50
Cash in Bank – LCCA 110 50

Settlement Cash in Treasury 101 10

Receivables –
7. Disallowances and Charges Disallowances/
Charges 138 10
a. Recording of disallowance for current year’s transaction

When the c.2 Recording of charges which collection were made in the prior year
disallowance becomes Receivables –
final and executory – Disallowances/ When the charge Receivables –
Overpayment of Office Charges 138 10 becomes final and Disallowances/
Supplies Office Supplies executory Charges 138 10
Amount paid - P100 Expense 849 10 Prior Years’
Should be - 90 Adjustments 533 10
Difference - 10

Settlement of Cash in Treasury 101 10 Settlement Cash in Treasury 101 10

Disallowance Receivables – Receivables –
Disallowances/ Disallowances/
Charges 138 10 Charges 138 10

b. Recording of disallowance for prior year’s transaction 8. Refund of Overpayment

18
 Acct 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.
Cod Credi rent) or through use and consumption (e.g. supplies). The adjusting entry for
Particulars Account Title e Debit t prepaid expenses is a debit to the expense account and a credit to the asset
account. Examples are rent, supplies, etc. Acquisition of productive facilities is
a. Overpayment taken up as receivable 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
To record Due from Officers depreciation expense and a credit to accumulated depreciation. The depreciable or
overpayment of and Employees 128 10 estimated life for different types of agency assets are presented in Table 2 (Annex
salaries and wages Salaries and Wages 7).
(When overpayment is – Regular Pay 801 10
ascertained) 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
To record refund of Cash in Treasury 101 10 debit to a liability account and a credit to revenue account.
overpayment Due from Officers
and Employees 128 10 Illustrative accounting entries:
Acct
.
b. Refund of overpayment not taken up as receivable Cod Credi
Particulars Account Title e Debit t
Refund of Cash in Treasury 101 10
overpayment of Salaries and Wages 1. Report of supplies Office Supplies
Salaries and Wages – – Regular Pay 801 10 utilized for P2,000. Expense 849 2,000
Regular Pay during the Office Supplies
current year Inventory 149 2,000

To take up refund of Cash in Treasury 101 10 2. Application Deferred Credits to

over – payment in the Prior Years’ of advance Income 440 2,500
ensuing year Adjustments 533 10 RPT for Real Property Tax 711 2,500
P2,500.
F. ADJUSTING AND CLOSING ENTRIES

Sec. 62. Adjusting Entries. – Adjusting entries are accounting journal entries Sec. 65. Accruals. – Accruals are revenues earned and expenses incurred in the
made in order to ensure that revenues and expenses are recorded in the period current accounting period that have not yet been recorded. Adjusting entries for
when they are earned or incurred following the revenue recognition and the accruals are required to record revenues earned and expenses incurred in the
matching principles. accounting period.

Adjusting entries are required every time financial statements are Adjusting entry for accrued revenues is a debit to a receivable account and a credit
prepared. The use of the adjusting entries makes it possible to report on the to an income account. Examples are interest, share from internal revenue
Balance Sheet the appropriate assets, liabilities and equity accounts at the collections covered by notice of funding checks issued, etc.
statement date and the Statement of Income and Expenses the net income/(loss) for
the period. 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
Sec. 63. Types of Adjusting Entries. – There are two types of adjusting entries: debts, etc. For bad debts, the entry is a debit to Bad Debts Expense and a credit to
Allowance for Doubtful Accounts.
a. Prepayments; and
b. Accruals Illustrative accounting entries:
Acct
Sec. 64. Prepayments. – Prepayments are expenses paid or revenues received .
before they are incurred or earned. Adjusting entries for prepayments are required Cod Credi
at the statement date to record the portion of the prepayment that represents the Particulars Account Title e Debit t
expense incurred or the revenue earned in the current accounting period. Sub-
categories of prepayments are prepaid expenses and unearned revenues. 1. Receipt of the Due from NGAs 130 20,000
Notice of Funding Share from Internal
Check Issued for the Revenue 746 20,00

19
 Acct Acct
. .
Cod Credi Cod
Particulars Account Title e Debit t Particulars Account Title e Debit Credit
December Share from Collections 0
Internal Revenue 2. To close the Income and Expense
Collections for Income and Expense Summary 532 5,670
P20,000. Summary to Retained Retained Operating
Operating Surplus Surplus 534 5,670
account.

2. Unpaid salaries Salaries and Wages

and wages of – Regular Pay 801 50,000 3. To close the Retained Operating
employees, at end of Due to Officers & Retained Surplus 534 5,670
accounting period, Employees 428 50,00 Operating Government Equity 501 5,670
P50,000. 0 Surplus to
Government
Sec. 66. Closing Journal Entries. – Closing journal entries are the accounting Equity
entries prepared to reduce all balances of the nominal accounts to zero at the end of account.
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:
Chapter 4. TRIAL BALANCE, FINANCIAL REPORTS
1. Debit all revenue accounts balances and credit the total to the AND STATEMENTS
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. Sec. 67. Trial Balance. – Trial balance is a list of all the general ledger accounts
3. Debit the credit balance of the Income and Expense Summary and their balances at a given time. The accounts are listed in the order in which they
account and credit the amount in the Retained Operating Surplus appear in the ledger, with the debit balances in the left column and credit balances
account, in case of a net income. on the right column.
4. Credit the debit balance of the Income and Expense Summary
account and debit the amount in the Retained Operating Surplus Sec. 68. Purpose of the Trial Balance. – The trial balance is prepared:
account, in case of a net loss.
5. Debit all credit balances of the intermediate accounts and debit a. To prove the mathematical equality of the debits and credits
the total to the Government Equity account. after posting;
6. Credit all debit balances of the intermediate accounts and credit b. To uncover errors in journalizing and posting; and
the total to the Government Equity account. c. As basis for the preparation of the financial statements.

Illustrative accounting entries: Sec. 69. Procedures in the Preparation of the Trial Balance. – The
Acct procedures in trial balance preparation shall be:
.
Cod a. List the account titles and their debit/credit balances based on
Particulars Account Title e Debit Credit the accounts and amount reflected in the general ledger;
b. Total the debit and credit columns; and
1. To close the Real Property Tax 711 100 c. Prove the equality of the two columns.
Revenue accounts to Share from Internal
the Income and Revenue Collections 746 10,000 Sec. 70. Pre-Closing Trial Balance. – The pre-closing trial balance is the trial
Expense Summary balance prepared from the general ledger accounts after the adjusting journal
account. entries have been journalized and posted. This is also termed as adjusted trial
balance.
Business Taxes &
Licenses 723 50 Monthly pre-closing trial balance for each fund shall be submitted not later than the
Registration Fees 761 20 twentieth day after the end of the month. It shall be supported by the Status of
Income and Expense Appropriations, Allotments and Obligations, for both the current and continuing
Summary 532 10,170 appropriations.

These reports shall be submitted to the following:

20
 To facilitate the preparation of the interim financial statements, the use of the
COA Unit Auditor – Original copy worksheet is recommended.
Local Sanggunian – 1 copy
Local Treasurer – 1 copy Sec. 74. Worksheet. – A worksheet is the accountants informal device for
Local Accountant – 1 copy accumulating and sorting information needed for the financial statements. It is a
columnar sheet of paper used to adjust the account balances and prepare the
The trial balance at the end of the quarter shall also be supported by a schedule of financial statements.
subsidiary ledger balances of the controlling accounts in the General Ledger and an
additional copy shall be submitted to the COA Regional Office thru the Unit Auditor. The use of the worksheet facilitates the end-of-period accounting and reporting
process. Also, it helps accountants prepare the financial statements on a more
Sec. 71. Status of Appropriations, Allotments and Obligations. – The status timely basis. The following worksheet format shall be used:
of appropriations, allotments and obligations is a schedule prepared showing the
appropriation, allotments and obligations of each function, program project and Name of LGU
activity (See Annex 1). Separate schedules shall be prepared for current Worksheet
appropriation and for continuing appropriations using the following column As of ____________, 20_____
headings:
Statement
Function/Program/ Appropriation Allotmen Obligatio Unobligat Accounts Trial Adjustment Adjusted of Income Balance
Project/ Activity s t n ed Balance s T/B & Sheet
Balance Expenses
Title Cod Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
Sec. 72. Post-closing Trial Balance. – Post-closing trial balance is the trial e
balance prepared at the end of the year after the closing entries are journalized and
posted in the general ledgers. In the Post-closing Trial Balance, all the nominal 1. Account title and code columns show the account titles/codes of the
accounts (revenue, expense and intermediate) are closed and the real accounts general ledger accounts.
(assets, liability and equity) are shown with balances. It shall be submitted not later 2. Trial balance column reflects amounts obtained from the general ledger
than the fourteenth day of February after the end of the calendar year with the balances.
following supporting schedules: 3. Adjustment columns are the adjustments effected for the prepayments and
accruals.
a. Status of Appropriations, Allotments and Obligations; 4. Adjusted trial balance shows the balances of all the accounts after the
b. Subsidiary Schedule of General Ledger account balances; and adjustment at the end of the accounting period.
c. Summary of Public Infrastructures (Annex 8). 5. Statement of Income and Expenses shows all the debit and credit items in
the adjusted trial balance for all the income and expense accounts. The
The post-closing trial balance with supporting schedules shall be distributed as difference between the income and expenses shall be reflected as Net
follows: Income/Loss to be extended to the credit column of the Balance Sheet.
6. Balance Sheet show all the debit and credit items in the adjusted trial
COA Central Office thru the Unit Auditor – 1 copy balance of all the asset, liability, equity and intermediate accounts
COA Regional Office – 1 copy affecting directly the Government Equity account.
COA Unit Auditor – 1 copy
Local Chief Executive – 1 copy Sec. 75. Statement of Management Responsibility for Financial
Local Sanggunian – 1 copy Statements. Statement of Management Responsibility for Financial Statements
Local Treasurer – 1 copy (Annex 2) shows the agencies’ responsibility for the preparation and presentation of
Local Accountant – 1 copy its financial statements. The statement shall be signed by the Chief Accountant and
the Head of the Agency or his authorized representative. It shall form an integral
Sec. 73. Interim Reports. – Interim reports are financial statements required to part of the financial statements, all of which shall be transmitted to the concerned
be prepared at any given period or at a financial reporting period shorter than a full agencies.
financial year, without closing the books of accounts. The following interim financial
statements and the Notes to Financial Statements shall be prepared and submitted Sec. 76. Year-end Financial Statements. – Local accountants shall prepare at
quarterly: the end of the year the following financial statements for each fund:

a. Balance Sheet; a. Balance Sheet;

b. Statement of Income and Expenses; and b. Statement of Income and Expenses; and
c. Statement of Cash Flows c. Statement of Cash Flows

The interim reports shall be prepared employing the same accounting principles The Chief Accountant shall likewise prepare the consolidated financial statements
used for annual reports. Adjusting entries shall be prepared for the interim period. for all funds and the Notes to the Financial Statements.

21
Sec. 77. Balance Sheet. – The Balance Sheet (Annex 3) shows the financial
condition of the agency at a specific date. It presents information on the assets,
liability and the government equity of the agency.
Sec. 78. Statement of Income and Expenses. – The Statement of Income and
Expenses (Annex 4) shows the income and expenses of the agency at the end of a
particular period. It presents the detailed information of the income and expenses
recognized during the period covered.
Sec. 79. Statement of Cash Flows. – The Statement of Cash Flows (Annex 5)
shows the agency’s cash activities. It reports cash receipts and cash payments and
net change in cash resulting from operating, investing and financing activities of an
agency during a period, in a format that reconciles the beginning and ending cash
balances.
Sec. 80. Notes to the Financial Statements. – The Notes to the Financial
Statements (Annex 6) are the accountant’s means of amplifying or explaining the
items presented in the main body of the statements. These are explanatory notes on
the accounts and/or accounting policies which will give additional information value
to the financial statements. In the Notes, the accountant is expected to report the
economic substance rather than the legal form of the transactions and to make
adequate disclosure.
The Notes to Financial Statements include the following:
1. Summary of significant accounting policies adopted and followed by the
reporting entity;
2. Narrative descriptions or detailed analyses of amounts shown on the face
of the balance sheet, statement of income and expenses and statement of
cash flows;
3. Customary or routine disclosure – which are information about
measurement bases of important assets, restrictions on assets, contingent
assets/liabilities, important long term commitments not recognized in the
body of the statements, etc.;
4. Disclosures of changes in accounting principles- changes in accounting
principles, practices or methods of applying them; and
5. Disclosures of subsequent events – disclosure of events that affect the
agency directly and that occur between the date of, or end of the period
covered by, the financial statements and date of completion of the
statements are necessary; if knowledge of the events might affect the
interpretation of the statements, even though the events do not affect the
propriety of the financial statements themselves.
Chapter 5. SPECIAL FUNDS
A. ACCOUNTING FOR SPECIAL EDUCATION FUND
Sec. 81. Special Education Fund. – The Special Education Fund (SEF) consist of
the proceeds of one percent (1%) tax on the assessed value of real property in
addition to the basic real property tax, which a province or city, or a municipality
within the Metropolitan Manila Area, may levy and collect.
Sec. 82. Application of Proceeds of the Additional One Percent (1%)
Special Education Fund Tax. – (a) The proceeds of the additional one percent
(1%) real property tax accruing to special education fund shall be automatically
released to the local school boards.
(b) In case of provinces, the proceeds of the special education fund shall be
divided equally between the provincial and municipal school boards.
(c) Said proceeds shall be allocated as determined and approved by the
local school boards concerned only for the following purposes:
1. Operation and maintenance of public schools;
2. Construction and repair of school buildings, facilities and equipment;
3. Educational research;
4. Purchase of books and periodicals; and
5. Sports development.
(Article 363 of the IRR of the Local Government Code)
Sec. 83. Special Education Fund Budget. – The Local School Board shall
determine in accordance with the criteria set by DECS, the annual supplementary
budgetary needs for the operation and maintenance of public schools within the
province, city, or municipality as the case maybe, and the supplementary local cost
of meeting such needs, which shall be reflected in the form of an annual school
board budget corresponding to its share of the proceeds of the special levy on real
property constituting the special education fund and such other sources of revenue
as the Local Government Code and other laws or ordinances may provide. (Article
184(b)(1) of the IRR of the Local Government Code)
The division superintendent, city superintendent, or district supervisor, as
the case maybe, shall prepare the budget of the school board concerned. Such
budget shall be supported by programs, projects and activities of the school board
for the ensuing fiscal year. A majority of all the members shall be necessary to
approve the budget. (Article 184(f) of the IRR of the Local Government Code)
The annual school board shall give priority to the following:
1. Construction, repair and maintenance of school buildings and other facilities of
public elementary and secondary schools;
2. Establishment and maintenance of extension classes when necessary; and
3. Holding of sports activities at the division, district, municipal, and barangay
levels.
Sec. 84. Basis of Recording Special Education Tax – Special Education Tax
Receivables shall be established at the beginning of the year based on Real Property
Tax Account Register/Taxpayer’s index card. At the beginning of the year, the
Treasurer shall furnish the Chief Accountant with a duly certified list of 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 Special
Education Tax Receivables.
Sec. 85. Delinquencies for Special Education Tax prior to CY 2002. –
Payment of delinquencies for special education taxes prior to CY 2002 shall be
recognized as a direct credit to Special Education Tax Income account.
22
Sec. 86. Collection Procedures for the Special Education Tax. – The additional stock cards shall be maintained by the Accounting Unit and the General Services
one percent (1%) tax on real property shall be collected simultaneously with the Officer or the Treasurer, as the case maybe. Likewise, separate weekly Summary for
basic real property tax. A single official receipt shall be issued for both taxes, Supplies and Materials Issued pertaining to the fund shall be prepared.
indicating therein the amount paid for the basic tax and the additional one percent
tax. However, the collecting officer shall prepare separate reports of collections for Sec. 93. Pro-forma Accounting Entries. – Pro-forma accounting entries for the
the two taxes. Further, the proceeds of the additional one per cent tax shall be fund, follows:
deposited in a separate depository account.
SPECIAL EDUCATION FUND (SEF)
Procedures for the turn over of collections, frequency of deposit of Acct
collection with the bank, preparation of report of collections, verification of .
collections and accountable forms, preparation of report of accountability for Cod
accountable forms as well as consolidation of reports of accountable forms shall be I. Particulars Account Title e Debit Credit
the same as that prescribed for collections in the General Fund.
1. Set-up Special Special Education
Sec. 87. Separate Cashbooks for Special Education Fund. – The Treasurer education Tax Tax Receivable 125 500,00
and/or the concerned accountable officers shall maintain separate cashbooks for the 0
SEF which shall be in accordance with the prescribed format. Receivable Deferred Special
Total Receivables – Education Tax
Sec. 88. Separate Registries, Books of Accounts, and Financial Reports for P500,00 Income 449 500,00
Special Education Fund. – The Chief Accountant shall maintain separate registries 0 0
for appropriation, allotment and obligations and books of accounts for SEF. He shall Provincial Share –
likewise prepare separate financial reports such as the Trial Balance, Balance Sheet, P250,00
Statement of Income and Expenses, Statement of Cash Flows and supporting 0
schedules, to be submitted within the prescribed timeframe.

For disbursements, separate set of JEVs shall also be prepared which shall 2. Collection of Cash in Treasury 101 200,00
be numbered in accordance with the prescribed codes. Special Special Education 0
Education Tax – Tax Receivable 125 200,00
Sec. 89. Preparation and Control of ALOBS for Special Education Fund. – P200,000. 0
The Allotment and Obligation Slips (ALOBS) pertaining to the fund shall be prepared
and signed by authorized official of the requesting department or office. This shall
be forwarded to the Budget Officer who, based on the approved school board Computation of Deferred Special
budget, shall verify the existence of appropriation for the proposed expenditure. He Shares of LGUs in RPT Education Tax
shall certify the ALOBS to that effect and number the same in accordance with the – 50% of Income 449 200,00
prescribed codes. This shall then be forwarded to the Chief Accountant who shall 0
certify as to obligations of allotments and shall record the same in the appropriate P200,000 for Provincial Special Education
Registry of Appropriations, Allotments and Obligations (RAAO). The ALOBS shall form Tax 713 100,00
an integral part of the disbursement voucher/payroll and the certifications of the 0
local budget officer and the accountant thereon shall serve as their certification of Share Due to LGUs 431 100,00
the disbursement as required by law. 0
Sec. 90. Certification as to Cash Availability. – The Treasurer shall certify as to
cash availability for the fund in the Disbursement Voucher and Purchase Request.
For infrastructure projects undertaken by contract, the Treasurer shall also certify as 3. Deposit of Cash in Bank – LCCA 110 200,00
to cash availability in the contract. This certification shall serve as the required collections with Cash in Treasury 101 0 200,00
certification under the law. authorized depository 0
bank
Sec. 91. Disbursement Procedures. – Disbursement procedures including the
reports to be submitted by the accountable officer concerned are the same as those
for the General Fund. However, disbursements shall be approved by the Local Chief 4. Remittance of share Due to LGUs 431 100,00
Executive concerned as co-chairman of the local school board. The division/city to Province ( Special (Province) 0
superintendent of schools or the district supervisor concerned, as the case maybe,
shall certify vouchers or payrolls as to validity, propriety, and legality of the claim Education Tax) Cash in Bank – LCCA 110 100,00
involved. – P100,000 0
Sec. 92. Inventory Process. – The perpetual inventory method and the moving
average method shall likewise be adopted in the accounting and costing of
inventory. The general procedures, the forms and reports for the holding of
inventory shall also be followed. However, separate perpetual inventory records and

23
 Acct Acct
. .
Cod Cod
I. Particulars Account Title e Debit Credit I. Particulars Account Title e Debit Credit
5. Receipt of allotment Memo entry in Contributions
for – Allotment Class: Registry of P2,850
Personal Services - Appropriations , Pag-ibig
P50,000 Allotments and Contributions
MOOE - Obligations 600
20,000 (Personal PhilHealth
Capital Outlay - Services– (RAAOPS, Contributions
MOOE – RAAOMO, 500
30,000 Capital Outlay – Total P3,950
Total P100,000 RAAOCO)

11. Payment of Life & Retirement

6. Obligation for PS – Memo entry in Government Share Insurance
Salaries of teachers for RAAOPS Contributions 817 2,850
extension class – PAG-IBIG
P30,000 Contributions 818 500
PHILHEALTH
Contributions 819 600
7. Grant of cash Cash Disbursing Cash in Bank – LCCA 110 3,950
advance for payroll Officers 107 25,000
Cash in Bank – LCCA 110 25,000
12. Obligation of Memo entry in
Traveling Expenses – RAAOMO
8. Payment of Salaries Salaries and Wages P500
Salaries per Payroll – Regular Pay 801 30,000
P 30,000 Cash – Disbursing
Less: Deductions – Officers 107 25,000 13. Grant of cash Due from Officers &
(Personal Share) Withholding Taxes advance Employees 128 500
Life & Ret. P 2,850 Payable 410 1,050 Cash in Bank – LCCA 110 500
Pag-ibig 600

PhilHealth GSIS Payable 411 2,850 14. Liquidation of cash Traveling Expenses
500 PAG-IBIG Payable 412 600 advance – Local 831 480
W/holding Tax Due from Officers &
1,050 Employees 128 480
5,000 PHILHEALTH
Net Pay per Payroll Payable 413 500
P25,000 15. Adjustment of Memo entry in
obligation of travel. RAAOMO

9. Remittance of salary Withholding Taxes

deductions Payable 410 1,050 16. Refund of cash Cash in Treasury 101 20
GSIS Payable 411 2,850 advance Due from Officers &
PAG-IBIG Payable 412 600 Employees 128 20
PHILHEALTH Payable
413 500
Cash in Bank – LCCA 110 5,000 17. Deposit of cash Cash in Bank – LCCA 110 20
refund
Cash in Treasury 101 20
10. Obligation for Memo entry in
Government Share: RAAOPS
Life & Ret. Ins. 18. Obligation of bill Memo entry in

24
 Acct Acct
. .
Cod Cod
I. Particulars Account Title e Debit Credit I. Particulars Account Title e Debit Credit
received from RAAOMO 1. Closing of Income Special Education 713 100,0
MERALCO Tax 00
Accounts Subsidy from Other
Funds 605 5,000
19. Payment of Electricity 835 800 Income and Expense
MERALCO bill – P800 Cash in Bank – LCCA 110 800 Summary 532 105,000

20. Obligation for the Memo entry in 2. Closing of Expense Income and Expense
purchase of Office RAAOMO Accounts Summary 532 41,23
Supplies – P500 0
Salaries & Wages –
Regular Pay 801 30,000
21. Payment of office Office Supplies Life & Retirement
supplies Inventory 149 500 Insurance
Withholding Taxes Contributions 817 2,850
Payable 410 20 PAG-IBIG
Cash in Bank – LCCA 110 480 Contributions 818 600
PHILHEALTH
Contributions 819 500
22. Obligation of Memo entry in Traveling Expenses
Equipment per RAAOCO – Local 831 480
Purchase Order – Electricity 835 800
P30,000 Depreciation–Office
Equipment 922 6,000

23. Payment of Office Equipment 222 30,000

equipment with Withholding Taxes 3. Closing of Income Income and Expense 532 63,77
Invoice/Delivery and Expense Summary Summary 0
Receipt Payable 410 3,000 Retained Operating
Cash in Bank – LCCA 110 27,000 Surplus 534 63,770

24. Receipt of fund Cash in Bank – LCCA 110 5,000 4. Closing of Retained Retained Operating
transfer from General Subsidy from Other Operating Surplus Surplus 534 63,77
Fund thru bank Funds 605 5,000 0
Government Equity 501 63,770

Adjusting Entries:
B. TRUST FUND
1. Depreciation of Depreciation–Office
Equipment using the Equipment 922 6,000 Sec. 94. Definition of Trust Fund. – Trust Fund shall consist of private and public
Straight Line Method: Accumulated monies which have officially come into the possession of the local government or of
Equipment : Depreciation – a local government official as trustee, agent or administrator, or which have been
Life Amount Office 322 6,000 received as a guaranty for the fulfillment of some obligation. A trust fund shall only
5 yrs. P6,000 Equipment be used for the specific purpose for which it was created or for which it came into
the possession of the local government unit.

Closing Entries : Sec. 95. Receipts Accruing to the Trust Fund. – Grants and donations
coming from foreign funding institutions, other levels of government and private

25
institutions/individuals for specific projects/purpose shall accrue to the Trust Fund. PROCESS PERSON / UNIT
Equity of the LGU on projects under a trust agreement shall also accrue to the Trust RESPONSIBLE
Fund. These receipts shall be credited to the Project Equity account.
1. Gather supporting documents, Concerned Office
Loans of LGUs for income generating projects from the Municipal Development Fund prepare DV/payroll and forward to
Office (MDFO) requiring counterpart funding from LGUs shall not be recorded in the Head of Department.
Trust Fund but as a Special Account in the General Fund.
2. Sign Box A of DV and submit to the Supervisor/Head of
Sec. 96. Collection Procedures for the Trust Fund. – Cash collections for the Accounting Unit. Department
Trust Fund shall be acknowledged through the issuance of an official receipt.
Procedures for the turn over of collections, frequency of deposit of collection with 3. Check completeness of documents Accounting Unit
the bank, preparation of report of collections, verification of collections and and verify existence of funds held in
accountable forms, preparation of report of accountability for accountable forms as trust, assign number to DV/Payroll,
well as consolidation of reports of accountable forms shall be the same as that sign Box B and forward to
prescribed for collections in the General Fund. Treasurer.

In case of receipt of funds through the bank, the Accountant shall draw a JEV based 4. Verify claim, certify cash availability Treasurer
on the bank credit memo. (Box C) and forward to approving
officer.
Sec. 97. Project Expenditures. – The construction period theory shall apply for
expenditures on infrastructure projects of the Trust Fund. For other projects, 5. Approve transaction (Box D) and Local Chief Executive/
expenditures shall be debited to the appropriate expenditure account. Expenditures forward DV to Cashier. Administrator of the
shall be closed to Project Equity account at year-end or upon project completion, Fund
whichever comes first.
6. Prepare and sign check and forward Treasurer
Sec. 98. Separate Cashbooks for Trust Fund. – The Treasurer and/or the check with DV to countersigning
concerned accountable officers shall maintain separate cashbooks for the Trust Fund officer.
which shall be in accordance with the prescribed format.
7. Countersign check and forward to Administrator
Sec. 99. Separate Books of Accounts and Financial Reports for Trust Fund. Accountant for preparation of the
– The Chief Accountant shall maintain separate books of accounts for Trust Fund. He Accountant’s Advice.
shall likewise prepare separate financial reports such as the Trial Balance, Balance
Sheet, Statement of Cash Flows and supporting schedules, to be submitted within
the prescribed timeframe.
8. Prepare Accountant’s Advice of Accountant
Sec. 100. Disbursements within Trust Agreement/Approved Local Check Disbursements and
Budget. – Disbursements from trust funds shall be in accordance with the specific return DV, check and supporting
purpose stated in the trust agreement/approved budget between the trustor and documents to Cashier/Treasurer.
trustee (LGU) as certified by the Chief Accountant. The certification on the DV as to
existence of funds held in trust shall serve this purpose. 9. Issue check to claimant. Record Treasurer
disbursement in Cashbook – Cash in
Sec. 101. Certification and Approval of Disbursements from Bank. Prepare Report of Checks
Trust Funds. – Disbursements from the Trust Fund shall require: Issued (RCI), forward RCI with DV
and supporting documents to
a. Certification and approval of vouchers and payrolls as to Accounting Unit.
validity, propriety and legality of the claim involved by the
department/ office head concerned; 10. Prepare the JEV based on individual Accounting Unit
b. Certification as to existence of funds held in trust and checks/voucher; sign “Prepared By”
completeness and propriety of supporting documents by the portion (approved by Chief
Accountant; Accountant), and record JEV in the
c. Certification as to cash availability by the Treasurer; and Check Disbursements Journal. Post
d. Approval by the Administrator of the fund. monthly to the General
Ledger/Subsidiary Ledgers
Sec. 102. Disbursement Process. – Disbursements from the Trust Fund shall be
as follows: 11. Forward RCI, DV, supporting Accountant
documents and JEV to the Office of
a. Disbursement by check the Auditor for final custody and
post audit.

26
PROCESS PERSON / UNIT Acct
RESPONSIBLE . II.
Cod III. Debi
Particulars Account Title e t Credit
b. Payments through cash advances check with approved Progress – Roads,
DV for payment to Highways &
For payments through cash advances, procedures 1 to 5 for check disbursement contractor upon Bridges 232 1,000,00
shall be followed. The rest of the procedures shall be the same as that of the receipt of second Withholding Taxes 0
General Fund. billing – 100% Payable 410 100,000
accomplished Cash in Bank – LCCA 110 900,000
Sec. 103. Inventory Process. – The perpetual inventory method and the moving
average method shall likewise be adopted in the accounting and costing of
inventory. The general procedures, the forms and reports for the holding of
inventory shall also be followed. However, separate perpetual inventory records and
stock cards shall be maintained by the Accounting Unit and the General Services
Officer or the Treasurer as the case maybe. Likewise, separate weekly Summary for
Supplies and Materials Issued pertaining to the fund shall be prepared.
e. Transfer of Public 243 1,000,00
Sec. 104. Pro-forma Accounting Entries for Trust Funds. – Accounting entries completed Infrastructures 0
for typical transactions under the trust funds are as follows: construction to Construction in
Public Infrastructure Progress –
Acct Roads, Highways 232 1,000,00
. II. & Bridges 0
Cod III. Debi
Particulars Account Title e t Credit
f. Remittance of Withholding Taxes
1. Receipt of grant from NGA taxes w/held Payable 410 200,000
Cash in Bank – LCCA 110 200,000
a. Receipt of grant
direct to bank from
NGA for: g. Purchase of Construction and
a. Construction Cash in Bank – LCCA 110 2,500,00 equipment Heavy Equipment 212 500,000
of road – P2M Project Equity 0 Withholding Taxes
b. Purch 502-01 502 2,500,00 Payable 410 50,000
ase of P2,500,000 0 Cash in Bank – LCCA 110 450,000
constr
uction
Equipment – h. Payment of Withholding Taxes
P500,000 withholding tax Payable 410 50,000
Cash in Bank – LCCA 110 50,000

b. Issuance of Construction in
check with approved Progress – i. Submission of full Project Equity 502 2,500,00
DV for payment to Roads, Highways liquidation to Public 243 0 2,000,00
contractor upon & Bridges 232 1,000,00 grantor and transfer Infrastructures 0
receipt of first billing Withholding Taxes 0 of completed road Construction and 212
– 50% accomplished Payable 410 100,000 and equipment to Heavy Equipment 500,000
Cash in Bank – LCCA 110 900,000 GF for LGU use

c. Submission of No entry Note: Under the GF books, completed infrastructure project shall be
statement of recorded in the Registry of Public Infrastructures with the TF JEV No. as
disbursements to basis. The transferred equipment shall be recorded as follows:
grantor General Fund Public 243 2,000,00
Books: Infrastructures 0
Construction and
d. Issuance of Construction in Heavy Equipment 212 500,000

27
 Acct Acct
. II. . II.
Cod III. Debi Cod III. Debi
Particulars Account Title e t Credit Particulars Account Title e t Credit
Invested Equity 537 2,500,00 c. Issuance of check Construction in
0 with approved DV Progress –
for payment to Agency Assets 230 500,000
At the end of the contractor for Withholding Taxes
year: Construction of Payable 410 50,000
Building, 50% Cash in Bank – LCCA 110 450,000
a. Closing of Invested Equity 537 2,500,00 accomplished.
Invested Equity to Government Equity 502 0 2,500,00
Government Equity 0
d. Remittance of Withholding Taxes
b. Transfer of Public Government Equity 502 2,000,00 withholding tax Payable 410 50,000
Infra- structure to Public 243 0 2,000,00 Cash in Bank – LCCA 110 50,000
RPI Infrastructures 0

2. Receipt of grant with counterpart fund from LGU

a. Project budget as
agreed upon
between grantor e. Issuance of Cash – Disbursing
and LGU for project: check with Officers 107 170,000
approved DV for Cash in Bank – LCCA 110 170,000
Grantor cash advance
Building - on salaries and
1.2M wages of
Equipment - . project
3M administrative
LGU Funded personnel
Office supplies
-1M
Salaries of project f. Liquidation of Salaries and Wages
Personnel - . Cash Advances – Casual/
4M Contractual 803 200,000
Total Withholding Taxes
2M Payable 410 30,000
Cash – Disbursing
Officers 107 170,000
b. Receipt of funds Cash in Bank – LCCA 110 2,000,00
from foreign Project Equity 502 0 2,000,00
funding 502-01 - 0 g. Remittance of Withholding Taxes
institution thru 1,500,000 tax withheld Payable 410 30,000
national 502-02 - Cash in Bank – LCCA 110 30,000
government 500,000
agency
h. Issuance of Office Supplies
check with approved Inventory 149 100,000
Note: Entry in LGU General Fund books shall be – DV for purchase of Cash in Bank – LCCA 110 100,000
supplies and
Grants and 889 500,000 materials
Donations
Cash in Bank – LCCA 110 500,000
i. Issuance of office Office Supplies
supplies Expenses 849 60,000

28
 Acct Acct
. II. . II.
Cod III. Debi Cod III. Debi
Particulars Account Title e t Credit Particulars Account Title e t Credit
Office Supplies property, plant and Construction in 0
Inventory 149 60,000 equipment account Progress – Agency
Assets 230 1,200,00
0
j. Purchase of IT IT Equipment and
equipment Software 215 250,000 q. Issuance of Cash – Disbursing
Withholding Taxes check for cash Officers 107 170,000
Payable 410 25,000 advance on salaries Cash in Bank – LCCA 110 170,000
Cash in Bank – LCCA 110 225,000 and wages

k. Remittance of Withholding Taxes r. Liquidation Salaries and Wages

withholding tax Payable 410 25,000 of salaries and – Casual/Contractual 803 200,000
Cash in Bank – LCCA 110 25,000 wages
Withholding Taxes
Payable 410 30,000
Cash – Disbursing
Officers 107 170,000

l. Issuance of check IT Equipment and

for installation of Software 215 50,000 s. Remittance of Withholding Taxes
equipment Cash in Bank – LCCA 110 50,000 withholding tax Payable 410 30,000
Cash in Bank – LCCA 110 30,000

End of Year
m.Closing. of Project Equity 502 260,000 t. Issuance of office Office Supplies
expenses to Project 502-02 - supplies Expenses 849 40,000
Equity P260,000 Office Supplies
Salaries and Wages Inventory 149 40,000
– Casual/ 803 200,000
Contractual
Office Supplies End of Year
Expenses 849 60,000 u. Closing of Project Equity 502 240,000
expenses to Salaries and Wages
Project Equity – Casual/
Succeeding year Contractual 803 200,000
n. Issuance of Construction in Office Supplies
check with approved Progress – Expenses 849 40,000
DV for payment to Agency Assets 230 700,000
contractor for Withholding Taxes
Construction of Payable 410 70,000 Project
Building – 100% Cash in Bank – LCCA 110 630,000 Completion
accomplished. v. Transfer of Project Equity 502 1,500,00
building and Building 204 0 1,200,00
equipment to the IT Equipment and 0
o. Remittance Withholding Taxes General Fund as Software 215
of withholding tax Payable 410 70,000 follows: 300,000
Cash in Bank – LCCA 110 70,000

p. Transfer of Property Plant and General Fund Building 204 1,200,00

construction in Equipment – Books: 0
progress to Building 204 1,200,00 IT Equipment and

29
 Acct
. II. SPECIAL ACCOUNT SUB-CODE
Cod III. Debi
Particulars Account Title e t Credit
Software 215 300,000 Electric, Light and Power System 05
Invested Equity 537 1,500,00 Telephone System 06
0 Toll Roads, Bridges and Ferries 07
Transportation System 08
At end of year: Invested Equity 537 1,500,00 Hospital 09
0 School 10
Government Equity 501 1,500,00 Sports Center 11
0 Recreational Center 12
Housing Projects 13
Convention/Conference Center 14
Parking Space 15
Ice Plant 16
Cemetery 17
20% Development Fund 18
80% Share from Energy Sources 19
Chapter 6. SPECIAL ACCOUNTS Share from Development of National Wealth 20
Loans 21
Interests 22
Sec. 105. Special Accounts in the General Fund. – Local government units Bond Issues 23
shall maintain special accounts in the General Fund for public utilities and other
economic enterprises, loans, interests, bond issues, and other contributions for
specific purposes; and development projects funded from the share of the local Sec. 109. Profit from Operation. – Profits or income derived from the operation
government concerned from the internal revenue collections and development of of public utilities and other economic enterprises, after deduction of the cost of
national wealth and such other special accounts which may be created by law or improvement, repair and other related expenses of the public utility or economic
ordinance. enterprises concerned, shall first be applied for the return of the advances or loans
made therefor, any excess shall form part of the general fund of the local
Sec. 106. Objectives for the Maintenance of Special Accounts. – Accounting government unit concerned.
procedures for the operation of the special accounts are adopted in order to:
Sec. 110. Reporting. – At the end of the year, post-closing trial balance
a. Determine whether the income generated by the public utilities or shall be prepared for each special account. Also, the following financial statements
economic enterprises are sufficient to meet their respective operating shall be prepared:
costs.
a. Balance Sheet
b. Provide adequate information as to the assets, liabilities and equity b. Statement of Income and Expenses
of each special account. c. Statement of Cash Flows

Sec. 107. Special Accounts Subsidiary Ledger. – Special accounts shall be These reports shall form part of the schedules of the General Fund trial balance.
maintained through the use of complete subsidiary ledger. In case the local
government unit maintains a number of the same economic enterprise, each shall
have its own set of subsidiary ledger (e.g. 8 markets - 8 subsidiary ledgers for the Sec. 111. Pro-forma Accounting Entries.
market).
Acct.
Sec. 108. Sub-codes for the Special Accounts. – The following shall be the sub- Transaction Code Debit Credit
codes for the special accounts:
a. Receipt of Share from IRC for P100,000.
Cash in Bank – LCCA 110 100,00
SPECIAL ACCOUNT SUB-CODE 0
Cash in Bank –LCCA (01)
General Fund Proper 01 P80,000
Market Operation 02 (18) 20,000
Share from Internal Revenue Collections 746 100,000
Slaughterhouse Operation 03
(IRC)
Waterworks System 04

30
 Acct. Acct.
Transaction Code Debit Credit Transaction Code Debit Credit
Share from IRC (01) Less: Withholding tax
80,000 1,000
(18) 20,000 Net
19,000

b. Receipt of collections for P148,500.

Distribution: Office Supplies Inventory 149 20,00
RPT- Basic 58,500 (net of 10% discount) 0
Market fees 40,000 Office Supplies Inventory (01) 8,000
Bus. Tax 50,000 Office Supplies Inventory (02)
10,000
Cash in Treasury 101 148,50 Office Supplies Inventory (18)
0 2,000
Cash in Treasury (01) Cash in Bank – LCCA 110 19,000
108,500 Cash in Bank - LCCA (01)
Cash in Treasury (02) 7,600
40,000 IV. Cash in Bank - LCCA (02)
Discount on RPT 937 6,50 9,500
0 Cash in Bank - LCCA (18)
Discount on RPT (01) 1,900
6,500 Withholding Taxes Payable 410 1,000
RPT Receivable 124 65,000
Withholding Taxes Payable (01)
RPT Receivable (01)
400
65,000
Withholding Taxes Payable (02)
Business Taxes & Licenses 723 50,000
500
Business Taxes & Licenses (01)
Withholding Taxes Payable (18)
50,000
100
Receipts from Markets 783 40,000
Receipts from Markets (02)
40,000
f. Report of Utilization of Office Supplies
c. Requisition of Office Supplies for the Operation of Market 2,000
following: Office of the Treasurer
Operation of Market No accounting entry 3,000
P10,000 20% Dev. Fund
Programs under the 20% Dev. Fund 1,000
2,000
Office of the Treasurer
8,000
Office Supplies Expenses 849 6,00
0
d. Obligation of the requested supplies. Entry in the RAAOMO Office Supplies Expense (01)
3,000
Office Supplies Expense (02)
e. Payment of Office Supplies for the 2,000
following: Office Supplies Expense (18)
Operation of Market 1,000
P10,000 Office Supplies Inventory 149 6,000
Programs under the 20% Dev. Fund
2,000 Office Supplies Inventory (01)
Office of the Treasurer 3,000
8,000 Office Supplies Inventory (02)
Total 2,000
20,000 Office Supplies Inventory (18)
1,000

31
 Acct. Acct.
Transaction Code Debit Credit Transaction Code Debit Credit
Subsidy to Special Accounts 898 12,00
0
Subsidy to Special Accounts (01)
g. Request for procurement of office 12,000
equipment Cash in Bank – LCCA 110 12,000
No accounting entry
of the following offices.
Cash in Bank – LCCA (01)
Office of the Accountant 5,000
12,000
Office of the Market Master 4,000

l. Receipt of the transferred funds.

h. Obligation of the requested equipment Entry in the RAAOCO Cash in Bank – LCCA 110 12,0
00
Cash in Bank – LCCA (02)
12,000
Subsidy from Special Accounts 606 12,000
Subsidy from Special Accounts (02)
i. Payment of the procured equipment:
12,000
Office of the Accountant
4,800
Office of the Market Master
4,000
Gross Chapter 7. SUPPLIES OR PROPERTY
8,800
Withholding Tax
440 ACCOUNTING FOR SUPPLIES OR PROPERTY
Net
8,360
Office Equipment 222 8,80 Sec. 112. Definition of Supplies or Property. – Supplies or property include
0 everything, except real property, which may be needed in the transaction of public
Office Equipment (01) business or in the pursuit of any undertaking, project or activity, whether in the
4,800 nature of equipment, furniture, stationery, materials for construction or personal
Office Equipment (02) property of any sort, including non-personal or contractual services such as the
4,000 repair and maintenance of equipment and furniture, as well as trucking, hauling,
Withholding Taxes Payable 410 440 janitorial, security, and related services. ( Sec. 356c of the LGC)

Withholding Taxes Payable (01)
240
Withholding Taxes Payable (02)
200
Cash in Bank – LCCA
Cash in Bank – LCCA (01)
Cash in Bank – LCCA (02)
Sec. 113. Classification of Supplies or Property. – Supplies or property shall
have the following classification:
110 8,360
a. Expendable supplies or property – referring to articles which are
normally consumed in use within one year or converted in the process
4,560 of manufacture or construction, or those having a life expectancy of
3,800 more than one year but which shall have decreased substantially in
value after being put to use for only one year. Examples are
stationery, fuel, spare parts. Expendable supplies forms part of the
maintenance and operating expenses of the LGU.

j. Obligation of Subsidy to the Operation of

the
Market from the GF Proper for P12,000
k. Transfer of the funds for P12,000.
Entry in the RAAOMO
b. Non-expendable supplies or property – referring to articles which are
not consumed in use and ordinarily retain their original identity during
the period of use, whose serviceable life is more than one year and
which add to the assets of the government. Examples are furniture,
fixtures, transport equipment and other equipment. Non-expendable
supplies or property are proper charges to capital outlay of the LGU.

32
 c. Non-personal services – includes, but is not limited to repairing, Receipt/ 26 @ 11 3,3 11.09 4,43
Invoice 00 5
cleaning, redecorating, and furnishing of necessary repair parts or
No.
other supplies as part of the services performed. Examples are
contractual services like trucking, hauling, janitorial, security and RIS No. Jan. 200
related services. Non-personal services are proper charges to 29 @ 2,21 200 2,21
maintenance and operating expenses of the LGU. 11.0 8 @11.0 7
9 9
Sec. 114. Perpetual Inventory Method. – Purchase of supplies and materials for Delivery 100 1,20 300 @
stock, regardless of whether or not they are consumed within the accounting period, Receipt/ Jan. @ 12 0 11.39 3,41
shall be recorded as inventory following the perpetual inventory method. Under the Invoice 30 7
perpetual inventory method, an inventory control account is maintained in the No.
General Ledger on a current basis. In addition, detailed inventory records are
maintained for each inventory item. (On Jan. 12, the new unit cost of P11.33 was found by dividing P6,800, the
total cost, by 600, the number of units at hand. Then on Jan. 16, the peso balance,
Regular purchases shall be coursed thru the inventory account and P1,135 represented the previous balance P6,800 less P5,665, the cost assigned to
issuances thereof shall be recorded as they take place, except those purchased out the 500 units issued on this date. New unit costs were calculated on Jan. 26 and 30
of the petty cash fund which shall be for immediate use and for stock in which case when additional units were acquired. )
shall be charged immediately to the appropriate expense accounts.
Sec. 116. Requisition Procedures. – (a) Requirement of Requisition - Any order
The Chief Accountant shall maintain the perpetual inventory records for supplies shall be filled by the provincial general services officer, the city general
comprising of Supplies Ledger Cards (SLC) for each commodity/stock, Property, Plant services officer, or the municipal treasurer, as the case maybe, for any office or
and Equipment Ledger Card (PPELC) for each category of plant, property and department of the LGU concerned only upon written requisition.
equipment and Work, Other Animals and Breeding Stocks Ledger Card (WOABSLC)
for each type of livestock. Such ledger cards shall contain the details of the (b) Forms to be used - Requisitions shall be accomplished using the
property, plant and equipment and livestock account in the inventory control following forms:
account in the general ledger.
(1) Requisition Issue Slip (RIS) - for supplies carried in stock;
The General Services Officer or the Municipal Treasurer, as the case and
maybe shall likewise maintain stock cards and property cards for supplies; property, (2) Purchase Request (PR) - for supplies not carried in stock.
plant and equipment; and work animals in their custody to account for the receipt
and disposition of the same. The balance per stock card/property cards should (c) Preparation of Requisition - At the beginning of the year, the Office of
always reconcile with the ledger cards of the accounting unit. They should also the General Services Officer (GSO) or the Municipal Treasurer, as the case maybe,
reconcile with other property records like Acknowledgement Receipt for Equipment shall prepare a PR for supplies and materials needed for the quarter based on the
(ARE). approved Annual Procurement Program. Subsequent requisition from stock shall be
made by the head of office or department needing the supplies. A Supplies
Sec. 115. Moving Average Method. – The moving average method of costing Availability Inquiry (SAI) shall be used to inquire as to availability of supplies needed
shall be used for costing inventories. This is a method of calculating cost of from the Office of the Chief Accountant. If supplies are available, the RIS shall be
inventory on the basis of weighted average on the date of issue. The Chief prepared and submitted to the GSO/Local Treasurer for the issuance of supplies. If
Accountant shall compute the inventory cost monthly using the method. Illustrative the supplies needed are not available from stock, a PR shall be prepared.
calculation of inventory using this method is as follows:
The head of office or department needing the supplies shall certify as to
Ball pen their necessity for official use and shall specify the project or activity where the
supplies or property are to be used.
Reference Date Received Issued Balance
Beg. (d) Certification on Allotment and Obligation Slip (ALOBS) - Every PR must
Balance Jan. 200 @ be accompanied by an ALOBS showing the certification of the local budget officer
per actual 1 P10 P2,00 and the local accountant, that an appropriation therefore exists; and that the
inventory 0 estimated amount of such expenditure has been obligated. The Local Treasurer shall
certify as to cash availability in the purchase request.
Delivery Jan 400
Receipt/ 12 @ 12 4,80 600 @
(e) Approval of Requisitions - Approval of requisitions by the head of office
Invoice 0 11.33 6,80
or department concerned who has administrative control of the appropriation
No. 0
against which the proposed expenditure is chargeable is deemed sufficient, except
RIS No. Jan. 500 100 @
in case of requisition for supplies to be carried in stock which shall be approved by
16 @ 5,66 11.35 1,13
the local chief concerned.
11.3 5 5
3
Delivery Jan. 300 400 @

33
 Sec. 117. Issuance of Purchase Orders or Contract. – Immediately after the PROCESS PERSON / UNIT RESPONSIBLE
LGU has performed all the required procedures adopting a particular mode of approved annual
procurement, a purchase/letter order or contract shall be issued. procurement program, at
the beginning of the year
The date when the purchase/letter order was received by the supplier or contractor and of each subsequent
shall be indicated clearly. quarters.

The purchase order or contract shall be released only to, and signed for by, the b. Prepare ALOBS covering the Office of the GSO or the Municipal
awardee or his duly authorized representative. requisition under the PR. Treasurer or the office authorized to
prepare the same.
Sec. 118. Acceptance and Inspection of Purchases. – Deliveries of items
purchased by the local government units shall be accepted first by the general
services officer or municipal treasurer as the case maybe before inspection. c. Approve ALOBS and the PR. The Budget Officer and the Chief
Inspection of purchases shall be made by the authorized inspector/s for conformity Accountant, for the ALOBS; and the Local
with specification in the order. Acceptance and inspection shall be made using the Chief Executive and the Local Treasurer,
Acceptance and Inspection Report (AIR). for the PR.

Sec. 119. Property Records to be Maintained. – The General Services Officer

or the Local Treasurer, as the case maybe, shall number each type of supplies and d. Prepare Purchase Order. GSO/Local Treasurer
maintain Stock Cards per stock number. He shall likewise maintain Property Cards
per category of property, plant and equipment.
e. Approve Purchase Order. Local Chief Executive
Deliveries of supplies or property shall be immediately recorded in the
property records on the basis of the AIR and other supporting documents. The AIR
and other supporting documents shall be forwarded to the Chief Accountant for the f. Receive delivered items, GSO/Local Treasurer
preparation of the DV and recording of deliveries in the appropriate ledger cards. prepare Acceptance and
Inspection Report (AIR)
Sec. 120. Recording of Deliveries of Supplies or Property in the Books of and signs acceptance
Accounts. – The Chief Accountant shall maintain Supplies Ledger Cards per stock portion.
number; Property, Plant and Equipment Ledger Cards for each category of assets;
and Real Property Ledger Cards for land.
g. Inspect items, and signs Property Unit/LGU Inspector
Upon receipt of the AIR and other supporting documents, the Chief inspection portion of the AIR.
Accountant shall record the deliveries in the appropriate ledger cards. Upon
completion of the disbursement process pertaining thereto the Chief Accountant
shall prepare the JEV taking up the in the books the procurement made. Thereafter,
the Chief Accountant shall reconcile the JEV with the appropriate ledger cards.
h. Record delivered items in GSO/Local Treasurer
the stock/property cards.
Sec. 121. Reporting on Issuance of Supplies/materials. – The General
Prepare Disbursement
Services Officer or the Local Treasurer, as the case maybe, shall consolidate weekly
Voucher (DV), sign box A and
the RIS for which supplies and materials were issued using the Summary of Supplies
forward the same with the
and Materials Issued (SSMI). The SSMI together with the original copy of the RIS
delivery receipt/invoice/
shall be submitted to the Chief Accountant, who shall compute cost of supplies
appropriate documents to
issued and ending inventory using the moving average method. Based on the SSMI,
Accounting Unit.
a JEV shall be prepared to record the expenditures using appropriate expenditure
accounts.
i. Record delivered items in Accounting Unit
Sec. 122. Inventory Process. – The following is the general process to be followed
Supply Ledger Card/Property,
in the control of inventory:
Plant and Equipment Ledger
Card/Work, Other Animals and
Breeding Stocks Ledger Card,
PROCESS PERSON / UNIT RESPONSIBLE
on the basis of the AIR.
Process DV and follow
a. Prepare Purchase Request Office of the General Services Officer disbursement process.
(PR) for supplies and (GSO) or the Municipal Treasurer as the Prepare JEV. Reconcile JEV
materials needed for the case maybe. with the entries in the ledger
quarter based on the cards recorded on the basis of

34
 PROCESS PERSON / UNIT RESPONSIBLE concerned not later than July 31 and January 31 of each year for the first and second
the AIR. semesters, respectively.

Physical count of property, plant, and equipment by type shall be made

annually and reported on the Report on the Physical Count of Property, Plant and
Equipment (RPCPPE). This shall be submitted to the Auditor concerned not later than
January 31 of each year.

Sec. 125. Disposal of Supplies or Property. - Disposal procedures shall be in

j. Prepare Stock Availability
Inquiry (SAI) and forward to
Accounting Unit.
accordance with applicable rules and regulations on supply and property
management in local government units. The Waste Materials Report (WMR) and the
Inventory and Inspection Report of Unserviceable Property (IIRUP) shall be used .
Requisitioning Unit
Sec. 126. Pro–Forma Accounting Entries. – The following are the pro-forma
accounting entries for supplies or property:

Acct
k. Verify records, advise Accounting Unit
.
requisitioning unit.
Cod
Particulars Account Title e Debit Credit
l. Prepare Requisition and Requisitioning Unit
1. Supplies and Materials
Issue Slip (RIS) and forward to
1.1 Spare parts
Property /Supply Unit.
-
(enter Obligation in
Issuance of the RAAOMO- P100)
m. Release GSO/Local Treasurer
PR for spare
supplies/equipment and record
parts
issuance in the stock
Spare Parts 155 100
cards/property cards.
Inventory 401 100
Record delivery of Accounts Payable
items and charge
invoice, if
n. Consolidate RIS for which GSO/Local Treasurer procurement is
supplies and materials were on credit 401 100
issued and prepare the Accounts Payable
Summary of Supplies and Payment of Withholding Taxes 410 20
Materials Issued (SSMI) and Invoice Payable 110 80
forward to Accounting Unit. Cash in Bank – LCCA
155 100
Spare Parts
o. Prepare JEV on the basis Accounting Unit Inventory 410 20
of SSMI, and record If Withholding Taxes 110 80
withdrawals in Supply Ledger Procurement Payable
Cards (SLC). is on Cash Cash in Bank – LCCA
878 50
Motor Vehicles 155 50
Sec. 123. Receipts of Issuance. – All issuances of supplies or property shall be Maintenance
properly receipted using the forms prescribed under applicable rules and regulations Spare Spare Parts
on supply and property management in local government units. For transfer of parts worth P50 Inventory
equipment, the Acknowledgement Receipt for Equipment (ARE) shall however be used for repairs of
used. motor vehicles.
Sec. 124. Inventory of Supplies or Property. – The local chief executive shall
require periodic physical inventory of supplies or property. Physical count of 1.2 Office
inventory items by type shall be conducted semestrally and reported in the Report Supplies -
of the Physical Count of Inventories (RPCI). This shall be submitted to the Auditor (Enter obligation in

35
 Acct Acct
. .
Cod Cod
Particulars Account Title e Debit Credit Particulars Account Title e Debit Credit
Issuance the RAAOMO-P100)
of PR for office 2.1 Office
supplies P100. Equipment -
Office Supplies 149 100 (Enter obligation in
Record Inventory Issuance of RAAOCO-P20,000)
delivery of items Accounts Payable 401 100 PR for Office
and charge Equipment
invoice, if -P20,000 Office Equipment 222 20,000
procurement is on Accounts Payable 401 20,000
credit. Accounts Payable 401 100 Record 20,0
Withholding Taxes charge Accounts Payable 401 00
Payment of Payable 410 20 invoice and Withholding Taxes
Charge Cash in Bank – LCCA 110 80 Delivery of Payable 410 2,000
Invoice item. Cash in Bank – LCCA 110 18,000

Payment of
Office Supplies delivered
Inventory 149 100 Equipment
Withholding Taxes
If Payable 410 20
procurement Cash in Bank – LCCA 110 80
is on cash
basis Office Supplies
Expenses 849 100
Office Supplies 2.2 Issuance of (Enter Obligation in
Inventory 149 100 PR for RAAOCO-P20,000)
Furniture and
Withdrawal of Fixture -
Office P20,000 Furniture and 224 20,000
Supplies for Fixtures 401 20,000
office use. Record Accounts Payable
Charge
1.3 Accountable Invoice and 401 20,000
Forms - delivery of Accounts Payable
(Enter obligation in item Withholding Taxes 410 2,000
Issuance the RAAOMO – Payable 110 18,000
of PR for P100.00) Payment of Cash in Bank – LCCA
accountable forms delivered
Accountable Forms furniture and
Inventory 148 100 fixture
Procurement Withholding Taxes
on a cash Payable 410 20
basis Cash in Bank – LCCA 110 80
3. Non-Personal Services
Accountable Forms
Expenses 848 100 3.1 Security
Accountable Forms Services -
Withdraw Inventory 148 100 (Enter obligation in
al of office Issuance of the RAAOMO-
supplies contract for P120,000)
security
services - Security and
2. Equipment P120,000 Janitorial 858 10,000

36
 Acct
.
Cod
Particulars Account Title e Debit Credit
Services 401 10,000
Receipt Accounts Payable
of monthly 401 10,000
Billing- P10,000 Accounts Payable
Withholding Taxes 410 1,000
Payable 110 9,000
Payment of Cash in Bank – LCCA
monthly
billing

3.2 Plumbing
Services -
(Enter obligation in
Signing of the RAAOMO-
contract for P120,000)
Plumbing
Services – General Services 857 10,000
P120,000 Accounts Payable 401 10,000

Receipt of Accounts Payable 401 10,000

monthly Withholding Taxes
billing – Payable 410 1,000
P10,000 Cash in Bank – LCCA 110 9,000

Payment of
Monthly
Billing

37