Implementing the

GOVERNMENT ACCOUNTING MANUAL

(For National Government Agencies)

GAM: Accounting

Session 16: Preparing Financial Statements

Slide 16 - 1

Session 16
Preparing Financial
Statements

GAM: Accounting

Session 16: Preparing Financial Statements

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Session overview

GAM: Accounting

Basic
Financial
Statements

Structure
and
Contents

Procedures
in the
Preparation
of FS

Notes to
FS

Session 16: Preparing Financial Statements

Slide 16 - 3

Learning Objectives

Prepare Financial Statements in accordance

with the contents and format prescribed in
the Government Accounting Manual

GAM: Accounting

Session 16: Preparing Financial Statements

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Financial Reporting

preparation, presentation
and submission of general
purpose FSs and other
reports.

GAM: Accounting

Session 16: Preparing Financial Statements

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Responsibility for Financial

Statements
Management of the Reporting entity
Management Prepares Statement of
Management Responsibility

GAM: Accounting

Session 16: Preparing Financial Statements

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Statement of Management Responsibility

The management of ____________________(Name of
Department/Agency)______________ is responsible for all information
and representations contained in the accompanying Statement of
Financial Position as of ______________ and the related Statement of
Financial Performance, Statement of Cash Flows, Statement of
Comparison of Budget and Actual Amounts, Statement of Changes in Net
Assets/Equity and the Notes to Financial Statements for the year then
ended. The financial statements have been prepared in conformity with
the Philippine Public Sector Accounting Standards and generally
accepted state accounting principles, and reflect amounts that are based
on the best estimates and informed judgment of management with an
appropriate consideration to materiality.
In this regard, management maintains a system of accounting and
reporting which provides for the necessary internal controls to ensure
that transactions are properly authorized and recorded, assets are
safeguarded against unauthorized use or disposition and liabilities are
recognized.

GAM: Accounting

Session 16: Preparing Financial Statements

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Components of Financial Statement

1. Statement of Financial Position

2. Statement of Financial
Performance
3. Statement of Changes in Net
Assets/Equity
4. Statement of Comparison of
Budget and Actual Amounts
GAM: Accounting

Session 16: Preparing Financial Statements

Slide 16 - 8

Components of Financial Statement

5. Statement of Cash Flows

6. Notes, comprising a summary
of significant accounting
policies and other explanatory
notes

GAM: Accounting

Session 16: Preparing Financial Statements

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The Accounting Cycle

The accounting cycle is the process
by which accountants prepare
financial statements for an agency
for a specific period of time.

GAM: Accounting

Session 16: Preparing Financial Statements

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Accounting Cycle
Analyze
Transactions

Preparation
of FS
Preparation of
Closing Entries/
Post-Closing TB
Preparation of
Adjusting Entries/
Pre-Closing TB
GAM: Accounting

Journalization

Posting to the
Ledger

Preparation of
Trial Balance

Session 16: Preparing Financial Statements

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Accounting Cycle
Analyze
Transactions
Preparation of
FS

Preparation of
Closing Entries/
Post-Closing TB

Preparation of
Adjusting Entries/
Pre-Closing TB
GAM: Accounting

Journalization

Posting to the
Ledger

Preparation of Trial
Balance

Session 16: Preparing Financial Statements

Slide 16 - 12

Adjusting Journal Entries (AJE)

1. Adjustment for Accrued Items
Account Title

Account
Code

Debit

Credit

Interest Receivable
Interest Income

10301050
40202210

xx

Salaries and Wages-Regular

Due to Officers and
Employees

50101010
20101020

xx

GAM: Accounting

Session 16: Preparing Financial Statements

xx

xx

Slide 16 - 13

AJE

continued

2. Adjustment for Deferred Asset

Account Title

Account
Code

Debit

Original Entry:
Prepaid Rent
Cash - MDS, Regular

19902020
10104040

1,000.00

Adjusting Entry:
Rent/Lease Expenses
Prepaid Rent

50299050
19902020

900.00

GAM: Accounting

Credit

1,000.00

Session 16: Preparing Financial Statements

900.00
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AJE

continued

3. Petty Cash Fund Adjustments

4. Reversion of Unused NCA
Account Title

Account
Code

Debit

Credit

Subsidy from National 40201010 10,000.00

Government
Cash - MDS, Regular
10104040
10,000.00

5. Adjustments for Unreleased Checks

GAM: Accounting

Session 16: Preparing Financial Statements

Slide 16 - 15

Accounting Cycle
Analyze
Transactions

Preparation
of FS

Preparation of
Closing Entries/Post
Closing TB
Preparation of Adjusting
Entries/Pre-Closing TB
GAM: Accounting

Journalization

Posting to the
Ledger
Preparation of
Trial Balance

Session 16: Preparing Financial Statements

Slide 16 - 16

Contents and Format of

Financial Statements

GAM: Accounting

Session 16: Preparing Financial Statements

Slide 16 - 17

The Statement of Financial Position

Comparative Presentation
Condensed and Detailed

Identification of FS
Current and Non-Current
presentation

GAM: Accounting

Session 16: Preparing Financial Statements

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Current and Non-Current presentation

Current Assets

a. Held for sale or for consumption

b. Held primarily for trading;
c. To be realized within one year
d. Unrestricted cash or a cash
equivalent

All other assets shall be

classified as non-current
.

GAM: Accounting

Session 16: Preparing Financial Statements

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Current and Non-Current presentation

Current Liabilities

Expected/Due to be settled within

twelve months;

Held primarily for trading;

No unconditional right to defer

settlement
GAM: Accounting

Session 16: Preparing Financial Statements

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The Statement of Financial Position

Appendix 2

AGENCY NAME
CONDENSED STATEMENT OF FINANCIAL POSITION
AS AT DECEMBER 31, 20X4
ASSETS
Current Assets
Cash and Cash Equivalents
Investments
Receivables
Inventories
Other Current Assets
Total Current Assets
Non - Current Assets
Investments
Receivables
Investment Property
Property, Plant and Equipment
Biological Assets
Intangible Assets
Other Non Current Assets
Total Non - Current Assets
Total Assets
GAM: Accounting

NOTE

20X4

20X3

6
7
8
9
14

XXX
XXX
XXX
XXX
XXX
XXX

XXX
XXX
XXX
XXX
XXX
XXX

7
8
10
11
12

XXX
XXX
XXX
XXX
XXX

XXX
XXX
XXX
XXX
XXX

13
14

XXX
XXX
XXX
XXX

XXX
XXX
XXX
XXX

Session 16: Preparing Financial Statements

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LIABILITIES AND NET ASSETS/EQUITY

LIABILITIES
Current Liabilities
Financial Liabilities
Inter-Agency Payables
Trust Liabilities
Deferred Credits/Unearned Income
Provisions
Other Payables
Total Current Liabilities
Non- Current Liabilities
Financial Liabilities
Trust Liabilities
Deferred Credits/Unearned Income
Provisions
Other Payables
Total Non- Current Liabilities
Total Liabilities
NET ASSETS/EQUITY
Accumulated Surplus/Deficit
Total Liabilities
Total Liabilities and Net Assets/Equity
GAM: Accounting

Note

20X4

20X3

15
16
17
18
19
20

XXX
XXX
XXX
XXX
XXX
XXX
XXX

XXX
XXX
XXX
XXX
XXX
XXX
XXX

15
17
18
19
20

XXX
XXX
XXX
XXX
XXX
XXX

XXX
XXX
XXX
XXX
XXX
XXX

XXX

XXX

XXX
XXX
XXX

XXX
XXX
XXX

Session 16: Preparing Financial Statements

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Statement of
Financial
Performance

GAM: Accounting

Session 16: Preparing Financial Statements

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Statement of Financial Performance (SFPer)

Financial Assistance/Subsidy account

GAM below Surplus/Deficit
NGAS component of total revenue
excluded from surplus or deficit for the current period
correction of prior period errors
effect of changes in accounting policies
Gains or losses arising on translating the FSs of a
foreign operation
Gains or losses on remeasuring AFS financial assets
shall be prepared in comparative detailed and
comparative condensed format

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GAM: Accounting

Session 16: Preparing Financial Statements

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Statement of Cash Flows

GAM: Accounting

Session 16: Preparing Financial Statements

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Statement of Cash Flows

2015 2014
Total Cash Provided by Operating,
Investing and Financing Activities

200

50

Add: Cash Balance, Beginning

100

50

Cash Balance, Ending

300

100

ASSETS
Current Assets
Cash and Cash
Equivalents
GAM: Accounting

Note

2015

2014

300

100

Session 16: Preparing Financial Statements

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Notes to Financial Statements

GAM: Accounting

Session 16: Preparing Financial Statements

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Major Contents of the Notes to FS

A. General Information/Agency Profile
B. Statement of Compliance and Basis of
Preparation of Financial Statements
C. Summary of Significant Accounting Policies

D. Supporting information for items

presented on the face of the FS
E. Other Information not on the face of FS
but required to be disclosed
GAM: Accounting

Session 16: Preparing Financial Statements

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GAM: Accounting

Session 16: Preparing Financial Statements

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Summary of Significant
Accounting Policies
The measurement basis (or bases) used in
preparing the FSs;
Application of transitional provisions in any
PPSAS; and
The other accounting policies used that are
relevant to an understanding of the FS

GAM: Accounting

Session 16: Preparing Financial Statements

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Additional information required by PPSAS

that is not shown on the face of the FS

Disclosure that the budgeted amounts have

not been exceeded/not exceeded
Nature and extent of prior period errors;
Events after the reporting date that have a
material effect on the FS;
Contingent liabilities
Related Party Disclosure;
Non-financial disclosures, e.g., the entitys
financial risk management objectives and
policies
GAM: Accounting

Session 16: Preparing Financial Statements

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Events After the Reporting

Date
Adjusting
Events

Provide conditions that existed at

the reporting date
adjust the amounts reflected in FS

Nonadjusting
Events

Indicative of conditions that arose

after the reporting date
disclose if the amount is material

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Events After the Reporting

Date
Reporting
Date
Date of fire
Date FS are
authorized
Date of
discovery

CASE 1
December 31,
2014
December 31,
2014
February 28, 2015
February 20, 2015

CASE 2
December 31,
2014
January 12,
2015
February 20,
2015
February 20,
2015

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Events After the Reporting Date

Disclosures

Adjusting Events
date when the FS are
authorized for issue
updating of disclosures about
conditions existing
at the balance sheet date
Non-Adjusting Events (material)
nature of the event
estimate of its financial effect or
a statement that such an
estimate cannot be made
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Changes in Accounting Policies, Estimates

and Errors

Accounting Policies
specific principles, bases, conventions,
rules, and practices
examples:
inventory valuation (FIFO, Average
Method)
classification, presentation and
measurement of financial asset and
liabilities
(cash to accrual)
retrospective application
to account the changes in policies
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Changes in Accounting Policies, Estimates

and Errors

Changes in Accounting Estimates

adjustment to carrying amount of an asset/liability, or
amount of the periodic consumption of an asset, that
results from assessment of the present status of and
the expected future benefits/ obligations associated
with it
examples:
changes in the useful life and salvage values of
depreciable assets
changes in the amount of expected warranty
obligations
Allowance for doubtful accounts
prospective application
to account the changes in estimates
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Changes in Accounting Policies, Estimates and

Errors

Errors
current period errors committed and discovered within the
same period
prior period errors - omissions from, and misstatements in, the
entitys financial statements for one or more prior periods
arising from a failure to use, or misuse of, reliable information
examples:
misapplication of accounting policies
fraud
arithmetical errors
omission of transactions and events from the financial
statements
Accounting for errors
prospective application current period errors
retrospective application prior period errors
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Changes in Accounting
Policies, Estimates and Errors
D
I
S
C
L
O
S
U
R
E
S

Change in Accounting Policies

- initial application of PPSAS
a. the title of the standard
b.the nature of change in accounting
policy
c. the amount of adjustment relating to
periods before those presented, to
the extent practicable
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Changes in Accounting
Policies, Estimates and Errors
D
I
S
C
L
O
S
U
R
E
S

Change in Accounting Policies

- Voluntary change in accounting policy
a. the reasons why applying the new
accounting policy provides reliable and
more relevant information
b. the nature of change in accounting policy
c. The amount of adjustment relating to
periods before relating before those
presented, to the extent practicable

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Changes in Accounting
Policies, Estimates and Errors
D
I
S
C
L
O
S
U
R
E
S

Change in Accounting
Estimates
a. Nature of the change
b. Amount of the change, unless
the effect on future period is
impracticable to estimate
c. If impracticable to estimate,
disclose the fact
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Changes in Accounting Policies,

Estimates and Errors
D
I
S
C
L
O
S
U
R
E
S

Correction of Error
a. Nature of the prior period error
b. Amount of the correction for each
financial statement line item
affected
c. Amount of the correction at the
beginning of the earliest prior
period presented; and
d. If retrospective restatement is
impracticable to apply, explain how
applied and date from when error is
Slide 16 - 42
corrected

Consolidated and Separate

Financial Statements
Consolidated
Financial
Statements

Separate
Financial
Statements

financial statements of an economic entity

presented as those of a single entity

presented by a controlling entity, an investor

in an associate, or a venturer in a jointly
controlled entity
investment are accounted for on the basis of
direct net assets/equity interest

Slide 16 - 43

Consolidated and Separate

Financial Statements
Presentation
of
Consolidated
FS

Consolidated FS includes:
a. Statement of Financial Position,
b. Statement of Financial Performance,
c. Cash Flow Statements
d. Statement of Changes in Net
Assets/Equity
e. Notes

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Consolidated and Separate

Financial Statements
Accounting for
controlled
entities, jointly
controlled
entities, and
associates

a. using the equity method

b. at cost
c. As a financial instrument

The same accounting shall be

applied for each category of
investments.

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Consolidated and Separate

Financial Statements
D
I
S
C
L
O
S
U
R
E
S

a. list of significant controlled entities

b. the fact that a controlled entity is not consolidated
c. summarized financial information of controlled entities,
that are not consolidated
d. name of any controlled entity in which the controlling
entity holds an ownership interest and/or voting rights of
50% or less, with an explanation of how control exists
e. the reasons why the ownership interest of more than 50%
of the voting or potential voting power of an investee does
not constitute control
f. reporting date of the financial statements of a controlled
entity
g. nature and extent of any significant restrictions
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Consolidated and Separate

Financial Statements
D
I
S
C
L
O
S
U
R
E
S

Other Facts required to be disclosed when separate

financial statements are prepared for a controlling entity
that elects not to prepare consolidated financial
statements.

Information required when a controlling entity

venturer with an interest in a jointly controlled entity
or an investor in an associate prepares separate
financial statements.

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PRACTICE SET

GAM: Accounting

Session 16: Preparing Financial Statements

Slide 16 - 48

THANK YOU!

GAM: Accounting

Session 16: Preparing Financial Statements

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