Manual on New Government Accounting System for LGUs

MANUAL ON THE
NEW GOVERNMENT ACCOUNTING

SYSTEM
for
Local Government Units
THE ACCOUNTING POLICIES
VOLUME I
1
Manual on the
NEW GOVERNMENT ACCOUNTING SYSTEM
for
Local Government Units
Sec. 1 TABLE OF CONTENTS
Volume I
Sec. 13The Accounting Policies
Sec. 1 Page
Chapter 1. Introduction
Sec. 01. Objectives of the Manual 1

Sec. 02. Coverage 1
Sec. 03. Legal Basis 1
Chapter 2. Basic Features and Policies
Sec. 04. Basic Features and Policies 2
Chapter 3. Accounting System
Sec. 2 General Accounting Plan
Sec. 05. General Accounting Plan 8
Sec. 3 Budgetary Accounts
Sec. 06. Budgetary Accounts 8

Sec. 07. Accounting for Appropriations 8
Sec. 08. Accounting for Allotments 10
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Page
Sec. 09. Accounting for Obligations 10

Sec. 10. Adjustment of Obligations 11
Sec. 11. Accounting Procedures for
Budgetary Accounts 11
Sec. 12. Terminology and Classification 12
Sec. 4 Income/Collections and Deposits
Sec. 13. Separation of Books and Depository Accounts 14

Sec. 14. Depository Accounts 15
Sec. 15. Remittance of Government Monies to the
Local Treasury 15
Sec. 16. Sources of Income of LGUs 15
Sec. 17. General Income Accounts 17
Sec. 18. Specific Income Accounts 16
Sec. 19. Methods of Accounting for Income 16
Sec. 20. Basis of Recording Real Property Tax/
Special Education Tax 16
Sec. 21. Delinquencies for Real Property Tax/
Special Education Tax Prior to CY 2002 17
Sec. 22. Discount on Real Property Tax/
Special Education Tax 17
Sec. 23. Fines and Penalties 18
Sec. 24. Other Receipts 18
Sec. 25. Borrowings 18
Sec. 26. Sale of Property, Plant and Equipment 18
Sec. 27. Refund of Cash Advances 18
Sec. 28. Receipt of Performance Bonds 18
Sec. 29. Reporting for Collections and Deposits 19
Sec. 30. Verification of Collections and
Accountable Forms 19
Sec. 31. Designation of Liquidating Officers 19
Sec. 32. Deposit of Collections 20
Sec. 33. Deposit of Field Collections 20
Sec. 34. Accounting for Collections and Deposits 21
Sec. 35. Receipts and Collection Process 21
Sec. 36. Pro-forma Accounting Entries 22
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Page
Sec. 5 Disbursements
Sec. 37. Disbursements 26

Sec. 38. Certification on Disbursements 26
Sec. 39. Approval of Disbursements 27
Sec. 40. Payments by Check 27
Sec. 41. Recording Check Disbursements in the
Cashbooks 27
Sec. 42. Release of Checks 27
Sec. 43. Reporting of Checks Issued 27
Sec. 44. Check Disbursement Process 28
Sec. 45. Payments in Cash 29
Sec. 46. Reporting of Cash Disbursements 30
Sec. 47. Cash Advances for Travel 30
Sec. 48. Payments out of the Petty Cash Fund 30
Sec. 49. Cash Disbursement Process 31
Sec. 50. Purchase or Construction of Property,
Plant and Equipment 33
Sec. 51. Purchase of Supplies 34
Sec. 6 Miscellaneous Transactions
Sec. 53. Miscellaneous Transactions 41

Sec. 54. Loss of Cash and Property 41
Sec. 55. Grant of Relief from Accountability 42
Sec. 56. Cash Overage 42
Sec. 57. Dishonored Checks 42
Sec. 58. Cancellation of Lost Check Issued 43
Sec. 59. Spoiled and Stale Checks 43
Sec. 60. Suspensions, Disallowances and Charges 44
Sec. 7 Adjusting, Closing and Reversing Entries
Sec. 62. Adjusting Entries 49

Sec. 63. Types of Adjusting Entries 49
Sec. 64. Prepayments 49
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Page
Sec. 65. Accruals 50

Sec. 66. Closing Journal Entries 51
Chapter 4. Trial Balance, Financial Reports and Statements
Sec. 67. Trial Balance 53

Sec. 68. Purpose of the Trial Balance 53
Sec. 69. Procedures in the Preparation of the
Trial Balance 53
Sec. 70. Pre-Closing Trial Balance 53
Sec. 71. Status of Appropriations, Allotments and
Obligations 54
Sec. 72. Post Closing Trial Balance 54
Sec. 73. Interim Reports 55
Sec. 74. Worksheet 55
Sec. 75. Statement of Management Responsibility for
Financial Statements 56
Sec. 76. Year-End Financial Statements 56
Sec. 77. Balance Sheet 56
Sec. 78. Statement of Income and Expenses 56
Sec. 79. Statement of Cash Flows 57
Sec. 80. Notes to the Financial Statements 57
Chapter 5. Special Funds
A. Accounting for Special Education Fund
Sec. 81. Special Education Fund 59

Sec. 82. Application of Proceeds of the Additional
One Percent (1%) Special Education
Fund Tax 59
Sec. 83. Special Education Fund Budget 59
Sec. 84. Basis of Recording Special Education Tax 60
Sec. 85. Delinquencies for Special Education Tax
prior to CY 2002 60
Sec. 86. Collection Procedures for the Special
Education Tax 60
Sec. 87. Separate Cashbooks for Special Education
Fund 61
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Page
Sec. 88. Separate Registries, Books of Accounts, and

Financial Reports for Special Education
Fund 61
Sec. 89. Preparation and Control of ALOBS for
Special Education Fund 61
Sec. 90. Certification as to Cash Availability 62
Sec. 91. Disbursement Procedures 62
Sec. 92. Inventory Process 62
B. Trust Fund
Sec. 94. Definition of Trust Fund 67

Sec. 95. Receipts Accruing to the Trust Fund 67
Sec. 96. Collection Procedures for the Trust Fund 67
Sec. 97. Project Expenditures 68
Sec. 98. Separate Cashbooks for Trust Fund 68
Sec. 99. Separate Books of Accounts and Financial
Reports for Trust Fund 68
Sec. 100. Disbursements within Trust Agreement/
Approved Budget 68
Sec. 101. Certification and Approval of Disbursements
from Trust Funds 68
Sec. 102. Disbursement Process 69
Sec. 104. Pro-forma Accounting Entries for
Trust Funds 71
Chapter 6. Special Accounts
Sec. 105. Special Accounts in the General Fund 77

Sec. 106. Objectives for the Maintenance of
Special Accounts 77
Sec. 107. Special Accounts Subsidiary Ledger 77
Sec. 108. Sub-codes for the Special Accounts 77
Sec. 109. Profit from Operation 78
Sec. 110. Reporting 78
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Page
Chapter 7. Supplies or Property
Sec. 112. Definition of Supplies or Property 82

Sec. 113. Classification of Supplies or Property 82
Sec. 114. Perpetual Inventory Method 83
Sec. 115. Moving Average Method 83
Sec. 116. Requisition Procedures 84
Sec. 117. Issuance of Purchase Orders or Contract 85
Sec. 118. Acceptance and Inspection of Purchases 85
Sec. 119. Property Records to be Maintained 86
Sec. 120. Recording of Deliveries of Supplies or
Property in the Books of Accounts 86
Sec. 121. Reporting on Issuance of Supplies/materials 86
Sec. 123. Receipts of Issuance 89
Sec. 124. Inventory of Supplies or Property 89
Sec. 125. Disposal of Supplies of Property 89
ANNEXES
Annex No.
1 Status of Appropriations, Allotments and

Obligation 95
2 Statement of Management Responsibility
for Financial Statements 99
3 Balance Sheet 100
4 Statement of Income and Expenses 101
5 Statement of Cash Flows 102
6 Notes to the Financial Statements 103
7 Table of Estimated Useful Lives 107
8 Summary of Public Infrastructures 113
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7
THE NEW GOVERNMENT ACCOUNTING SYSTEM MANUAL
For Local Government Units
Chapter 1. INTRODUCTION
Sec. 01. Objectives of the Manual. The New Government

Accounting System Manual presents the basic policies and
procedures; the new coding system and chart of accounts; the
accounting books, reports/forms and financial statements, and
illustrative accounting entries to be adopted by all local government
units effective January 1, 2002. The objectives of the Manual are to
prescribe the following:
a. Uniform guidelines and procedures in

accounting for government funds and
property;
b. New coding structure and new chart of
accounts; and
c. New accounting books, reports/forms,
financial statements and accounting entries.
Sec. 02. Coverage. This Manual shall be used by all local

government units (LGUs).
Sec. 03. Legal Basis. This Manual is prescribed by the

Commission on Audit pursuant to Article IX-D, Section 2 par. (2) of
the 1987 Constitution of the Republic of the Philippines which
provides that:
"The Commission on Audit shall have exclusive

authority, subject to the limitations in this Article, to
define the scope of its audit and examination, establish
the techniques and methods required therefor, and
promulgate accounting and auditing rules and
regulations, including those for the prevention and
disallowance of irregular, unnecessary, excessive,
extravagant, or unconscionable expenditures, or uses of
government funds and properties". (underscoring
supplied)
8
Chapter 2. BASIC FEATURES AND POLICIES
Sec. 04. Basic Features and Policies. The new

government accounting system has the following basic features and
policies, to wit:
a. 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.
b. 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.
c. Special Accounts in the General Fund. Special

accounts in the General Fund complete with subsidiary
ledgers, shall be maintained for the following:
1. Public utilities and other

economic enterprises;
2. Loans, interests, bonds issued,
and other contributions for specific
purposes;
3. Development projects funded
from the Share in the Internal Revenue
Collections; and
4. Such other special accounts
which may be created by law or ordinance.
d. Chart of Accounts and Account Codes. A new coding

structure and a new chart of accounts with a three-digit
account numbering system shall be adopted.
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e. Books of Accounts. The Books of Accounts are as
follows:
Journals
Cash Receipts Journal (CRJ)
Cash Disbursements Journal (CDJ)
Check Disbursements Journal (CKDJ)
General Journal (GJ)
Ledgers
General Ledger (GL)
Subsidiary Ledgers, where applicable for:
Cash
Receivables
Inventories
Investments
Property, Plant and Equipment
Liabilities
Income
Expenses
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:
Cashbook Cash in Treasury

Cashbook Cash in Bank
Cashbook Cash Advances
The Treasurers/Collectors shall prepare the Report of

Collections and Deposits (RCD) daily and the Report of
Accountability for Accountable Forms (RAAF) monthly.
f. Financial Statements. The following statements shall

be prepared:
Balance Sheet
Statement of Income and Expenses
Statement of Cash Flows
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Notes to Financial Statements shall accompany
the above statements.
g. Trial Balance. The two money-column trial balance

shall be used.
h. 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:
1. Registry of Appropriations, Allotments and

Obligations Capital Outlay (RAAOCO)
Obligations Maintenance and Other Operating
Expenses (RAAOMO)
Obligations Personal Services (RAAOPS)
Obligations Financial Expenses (RAAOFE).
i. 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).
j. 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.
k. Valuation of Inventory. Cost of ending inventory of

supplies and materials shall be computed using the
moving average method.
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l. 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.
m. 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.
n. 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:
1. Registry of Public Infrastructure Bridges (RPIB)

2. Registry of Public Infrastructure Roads (RPIR)
3. Registry of Public Infrastructure Plazas,
Monuments, etc. (RPIP)
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.
Completed public infrastructures funded out of a

loan shall, however, be retained in the books of accounts
until the loan is fully paid.
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A Summary of all Public Infrastructures (based
on the different registries) shall be prepared annually and
included in the Notes to Financial Statements.
o. 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.
p. 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.
q. 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.
r. 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.
s. Recognition of Liability. Liability shall be recognized

at the time goods and services are accepted or rendered
and supplier/creditor bills are received.
t. Interest Accrual. Whenever applicable and appropriate,

interest income and/or expense shall be accrued and
recognized in the books of accounts.
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u. Accounting for Borrowings and Loans. All
borrowings and loans incurred shall be recorded direct to
the appropriate liability accounts.
v. 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.
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Sec. 8 Chapter 3. ACCOUNTING SYSTEM
Sec. 9 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 preparation of the financial reports shall also be undertaken
by the Office of the Accountant.
The General Accounting Plan (Table 1) is presented as to the

following type of transactions:
a. Appropriations, Allotments and Obligations

b. Collections and Deposits
c. Disbursements
By cash
By check
d. Miscellaneous and Other transactions
B. BUDGETARY ACCOUNTS
Sec. 06. Budgetary Accounts. Budgetary accounts are

composed of appropriations, allotments and obligations.
Sec. 07. Accounting for Appropriations. Appropriation

refers to an authorization made by ordinance, directing the payment
of goods and services from local government funds under specified
conditions or for specific purposes.
15
16
The local sanggunian approves the annual budget thru the
issuance of appropriation ordinance. On the first business day of
the fiscal year, the entire annual budget of the local government
unit shall be recorded in the Registry of Appropriations,
Allotments and Obligations (RAAO). The appropriations, in the
amounts approved by the legislative body and confirmed by the
reviewing authorities, are recorded in the registries maintained by
the accountant where they may be compared with the actual
developments of the period.
Budgetary reserves which are stand by appropriations

ready for release in case of calamities, as well as supplemental
budget are similarly recorded in the RAAO. In case the LGU is
operating on a re-enacted budget, said re-enacted budget shall
likewise be recorded in the registry. Once current budget is
approved, the necessary adjustments shall be made in the
registry.
Separate registries shall be maintained for the four classes of

expenditures per responsibility center, to wit:
a. Registry of Appropriations, Allotments and

Obligations - Capital Outlays (RAAOCO)
b. Registry of Appropriations, Allotments and
Obligations - Maintenance and Other Operating
Expenses (RAAOMO)
c. Registry of Appropriations, Allotments and
Obligations - Personal Services (RAAOPS)
d. Registry of Appropriations, Allotments and
Obligations - Financial Expenses (RAAOFE)
Sec. 08. Accounting for Allotments. Allotment is the

authorization issued by the Local Chief Executive (LCE) to a
department/office of the LGU, which allows it to incur
obligations, for specified amounts, within the appropriation
ordinance. Allotments are released quarterly based on the Work
and Financial Plan and Request for Release of Allotment. The
Accountant, upon receipt of the Advice of Allotment, shall enter
the allotment in the RAAOs.
Sec. 09. Accounting for Obligations. Obligations refer to

the amounts committed to be paid by the LGU for any lawful act
17
made by an accountable officer for and in behalf of the local
government unit concerned.
Obligations shall be taken up in the registries as they are

incurred. For each obligation, the requesting department/office
shall prepare the Allotment and Obligation Slip (ALOBS) signed
by the department or office head as requesting official and
forward this, together with the supporting documents, to the
Budget Officer.
The Budget Officer shall certify to the existence of

appropriation that has been legally made for the purpose by
signing the appropriate box in the ALOBS and assign the ALOBS
number thereto. The Accountant shall review the ALOBS and
certify as to obligation of the allotment by signing the
appropriate box in the ALOBS. He shall also fill up the Status of
Obligation. The Accountant shall record the amount of obligation
in the RAAOs.
Sec. 10. Adjustment of Obligations. The Chief

Accountant shall record paid disbursement vouchers in the Status of
Obligation portion (Payments) of the ALOBS. Any balance
appearing in the ALOBS after full payment of obligations shall form
part of unobligated allotment. The Chief Accountant shall adjust
accordingly the amount of recorded obligations in the RAAO using
the same ALOBS number as reference. At the end of each month, the
Chief Accountant and the Budget Officer shall reconcile their records
on allotments available for obligation.
Sec. 11. Accounting Procedures for Budgetary Accounts.

Summarized hereunder is the process in accounting for budgetary
accounts:
PROCESS PERSON / UNIT

RESPONSIBLE
a. Records in the Office of the

appropriate RAAOs the approved Accountant
appropriation per Appropriation
Ordinance.
b. Forwards the advice Office of the Budget

of allotments to the Office of the Officer
18
RESPONSIBLE
Accountant and returns the work plan
to the concerned departments/ offices.
c. Enters the allotments Office of the

in the RAAOs. Accountant
d. Prepares ALOBS Heads of

based on disbursement departments/offices
vouchers/purchase requests and/or
supporting documents. Signs the
appropriate box for requesting office.
Forwards the same to the Office of
the Budget Officer.
e. Certifies the ALOBS Budget Officer

as to the existence of appropriations
based on the appropriation ordinance.
Assigns ALOBS number and
forwards the same to the Office of the
Accountant.
f. Certifies the ALOBS Chief Accountant

as to the obligations of allotments.
Records the obligation in the
appropriate column of the RAAOs
and in the Status of Obligation
portion (Obligation) of the ALOBS.
g. Records paid Office of the

disbursement vouchers in the Status Accountant
of Obligation portion (Payments) of
the ALOBS. Any balance appearing
in the ALOBS after full payment of
obligations shall form part of
unobligated allotment. Adjust
accordingly the amount of recorded
obligations in the RAAOs.
h. At the end of each Budget Officer and

month, reconcile records on Chief Accountant
allotments available for obligation.
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Sec. 12. Terminology and Classification. A common
terminology and classification shall be used consistently throughout
the budget, the accounts and the financial reports.
For this purpose, the following specific expenditures shall be

recorded in the appropriate RAAOs:
a. RAAOCO
Investments outlay (e.g. stocks, bonds)
Land, Land Improvements and Leasehold
Improvements outlay
Buildings and Other Structures outlay (e.g.
school buildings, markets and
slaughterhouses, hospital and health
centers, etc.)
Public Infrastructures outlay (e.g. parks,
plaza, monuments, bridges etc.)
Furniture and Fixtures outlay
Work Animals outlay
Breeding stocks
Machineries and Equipment outlay (e.g.
dump trucks, construction equipment,
industrial machineries, technical and
scientific equipment, etc.)
Aircrafts, Trains and Motor Vehicles outlay
(e.g. motorcycles, cars, vans, etc.)
Artesian Wells, Reservoirs, Pumping Stations
and Conduits outlay
Books outlay
Ordnance outlay
IT Equipment and Software outlay
Other Property, Plant and Equipment outlay
Reforestation Projects
Arts, Archeological Specimen and Other
Exhibits
b. RAAOPS
Salaries and Wages (e.g. regular pay, part-
time pay, overtime and night pay, holiday
pay, etc.)
20
Allowances (e.g. PERA, hazard pay, RATA,
etc.)
Benefits (e.g. bonus, cash gifts, productivity,
pension, etc.)
Government Shares on Employees
Contributions
c. RAAOMO
Subsidies (e.g. Subsidy to LGUs, Subsidy to
Other Funds, etc.)
Livestock (e.g. swine, hogs, chicken, goats,
etc.)
Crops
Supplies (e.g. office, medical, dental and
laboratories, spare parts, gasoline and oil,
etc.)
Repairs and Maintenance
Printing and Binding
Travel
Consultancy
Light, Water and Gas
Communication (e.g. telephone, telegraph,
internet, postage, etc.)
Auditing Services
Other Services (e.g. janitorial, security,
hauling, etc.)
Extraordinary and Miscellaneous Expenses
All other expenditures in the Chart of
Accounts for MOOE, except depreciation,
obsolescence, bad debts, loss on sale of
assets, loss of assets, discount on Real
Property Tax and Special Education Tax.
d. RAAOFE
Bank Charges
Interest Expenses
Commitment Charges
Other Financial Charges (e.g.
underwriting fees, guarantee fees)
Loan Amortization
21
C. INCOME/COLLECTIONS AND DEPOSITS
Sec. 13. Separation of Books and Depository Accounts.

Local accountants and treasurers shall maintain separate books and
depository accounts, respectively, for each fund in their custody or
administration.
Sec. 14. Depository Accounts. Local treasurer shall

maintain depository accounts in the name of their respective local
government units with banks, preferably government-owned, located
in or nearest to their respective areas of jurisdiction. Earnings of its
depository accounts shall accrue exclusively thereto.
Sec. 15. Remittance of Government Monies to the Local

Treasury. Officers of the local government authorized to receive
and collect monies arising from taxes, revenue, or receipts of any
kind shall remit the full amount received and collected to the treasury
of such local government unit which shall be credited to the
particular account or accounts to which the monies in question
properly belong.
Sec. 16. Sources of Income of LGUs. The main sources

of income of LGUs are as follows:
a. Tax revenues, fees and charges

b. Share from Internal Revenue Collections
c. Share from National Wealth
The sources of income are further classified into general

income accounts and specific income accounts.
Sec. 17. General Income Accounts. The following shall

comprise the General Income Accounts applicable to LGUs:
a. Subsidy from Other LGUs

b. Subsidy from Other Funds
c. Subsidy from Special Accounts
d. Sales Revenue
e. Dividend Income
f. Interest Income
g. Gain on Sale of Securities
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h. Gain on Sale of Assets
i. Sale of Confiscated Goods and Properties
j. Foreign Exchange (FOREX) Gains
k. Miscellaneous Operating and Service
Income
l. Fines and Penalties Government Services
and Business Operations
m. Income from Grants and Donations
Sec. 18. Specific Income Accounts. The following major

classification comprise the specific income accounts for LGUs:
1. Property Taxes
2. Taxes on Goods and Services
3. Other Taxes
4. Other Specific Income
Sec. 19. Methods of Accounting for Income. The

following accounting methods shall be adopted in recording income:
a. Accrual Method
Accrual method of accounting shall be used to record
Share from Internal Revenue Collections in the books of
accounts. Upon receipt of the Notice of Funding Check
Issued from Department of Budget and Management
(DBM), Share from Internal Revenue Collections shall
be taken up as Due from NGAs and credited to Share
from Internal Revenue Collections. However, Cash in
Bank shall be debited upon receipt of Bank Credit
Advice as to receipt of the Share from Internal Revenue
Collections regardless of whether or not the Notice 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
23
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/Taxpayers index card.
At the beginning of the year, the Treasurer shall furnish the Chief
Accountant of a duly certified list showing the name of taxpayers and
the amount due and collectible for the year. Based on the list, the
Chief Accountant shall draw a Journal Entry Voucher (JEV) to record
the debit to Real Property Tax Receivable/Special Education Tax
Receivable and crediting to Deferred Real Property Tax
Income/Deferred Special Education Tax Income.
Upon collection of Real Property Taxes from taxpayers, the

account Deferred Real Property Tax Income/Deferred Special
Education Tax Income shall be debited while the Real Property Tax
Income due to the municipality is recognized/credited. The share of
the Province and Barangay shall also be credited to Due to LGUs.
Every end of the week, thereafter the Municipal Accountant

shall furnish the Provincial Accountant with a summary of the JEVs
showing the breakdown of the amounts Due to LGUs. The summary,
which shall be supported with copies of the JEVs, shall be the basis
of the Provincial Accountant to draw the JEV taking up 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
24
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.
25
Sec. 27. Refund of Cash Advances. Cash advances for
official travel shall be taken up as a receivable from the concerned
official or employee. Refunds made shall be credited to the
receivable account previously set up. Cash advances for salaries and
wages shall be recorded as debits to the account Cash Disbursing
Officer. Any refund made shall be credited to this account.
Sec. 28. Receipt of Performance Bonds. Performance

bond posted by contractor or supplier to guaranty full and faithful
performance of the their work may be in the form of cash, certified
check or surety. Performance bond in cash or certified check shall be
acknowledged by the issuance of official receipt and recorded in the
books by the Accountant drawing a JEV for the purpose. In case of
surety bond, an acknowledgment receipt shall be issued by the
authorized official.
Sec. 29. Reporting for Collections and Deposits.

Collectors/tellers shall issue a receipt to acknowledge collections
made. The receipt maybe in the form of pre-numbered Official
Receipts, or cash tickets and the like. At the close of each business
day, these collectors/tellers shall accomplish the Report of
Collections and Deposits (RCD) in four copies. The original and two
copies, together with the duplicates of the official receipts issued,
shall be submitted to the treasurer/cashier to whom the cash collected
shall be turned over. The fourth copy of the RCD shall be retained
by the collector/teller concerned. Barangay Treasurers deputized to
collect taxes imposed by provinces, cities and municipalities shall
follow the same procedures in turning over their collections to the
treasurer/cashier concerned.
In the case of collectors assigned to the field, where travel

time from their places of assignment to the Treasurers Office is more
than one day, turnover of collections shall be made at least once a
week or as soon as the collections reach P5,000.00.
Sec. 30. Verification of Collections and Accountable

Forms. The Treasurer/Cashier shall verify the Report of
Collections and Deposits; check the statement of accountable forms
as to initial balances on hand, receipts, issues and the ending balances
on hand; make a physical count of the accountable forms remaining
in the custody of the collector/teller and check the same against the
new balances on hand column. He shall indicate his verification by
26
affixing his signature at the back of the triplicate copy of the last
official receipt issued. He shall count the money turned over to him
and sign the certification and receipt portion of all copies of RCD.
Sec. 31. Designation of Liquidating Officers. The

Treasurer may designate liquidating officers from among the
collectors/tellers whenever necessary.
a. C
ollectors/tellers shall turn over their collections to their
designated liquidating officer. The RCD shall however
be prepared in five copies, four copies to be submitted to
the liquidating officer, the fifth copy to be retained by the
collector/teller.
b. T
he liquidating officer shall perform the procedures for
the receipt and verification of collections turned over to
him. He shall also accomplish the RCD in four copies
to summarize the collections turned over to him by the
collectors/tellers as well as his own collections.
c. T
he liquidating officer shall turn over intact the cash
collections to the Treasurer/Cashier together with the
originals and two copies of the RCDs of collectors/tellers
and the duplicates of the official receipts issued. The
Treasurer/Cashier shall acknowledge receipt of the cash
and all accompanying documents by signing all copies of
the RCD of liquidating officer on the certification and
receipt portion of the form. The fourth copy of the RCD
of the liquidating officer and RCDs of collectors/tellers
shall be retained by the liquidating officer.
Sec. 32. Deposit of Collections. The Treasurer/Cashier

shall deposit intact all his collections as well as all collections turned
over to him by the collectors/tellers with the authorized depository
bank daily or not later than the next banking day. He shall record all
deposits made in the cashbook and prepare the RCD.
27
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:

RESPONSIBLE
a. Receive payment Collector/Teller

from taxpayers/ creditors and issue
Official Receipt (OR). Prepare
Report of Collections and Deposits.
Remit to the Liquidating Officer (if
one is designated) or Treasurer.
b. Check remittances Liquidating

and verifies accountable forms of Officer
collectors/tellers. Consolidates
collections and remits to the
Treasurer/Cashier. Prepares RCD.
28
RESPONSIBLE
c. Receive remitted Treasurer

collections, consolidates the same
and prepares RCD. Records in the
Cashbook Cash in Treasury.
d. Deposit collections Treasurer

in the appropriate bank account per
authorized depository bank. Records
deposit in the Cashbook Cash in
Bank.
e. Forward RCD to Treasurer

Accounting Unit with copies of ORs
and validated deposit slips.
f. Prepare Journal of Accountant

Entry Voucher and record in the Cash
Receipt Journal.
Sec. 13Sec. 36. Proforma Accounting Entries. The

following are pro-forma accounting entries for income, collection
and deposit:
Acct.
Particulars Account Title Code Debit Credit
INCOME
1. Real Property Tax Basic

A. Books of the
Municipality
a. Setting-up of RPT Real Property Tax

Receivable Receivable 124 1,000
RPT = P1,000 Deferred Real
RPT Sharing: Property Tax Income 448 1,000
Municipal - 40%
Province - 35%
Barangay - 25%
b. Receipt of Cash in Treasury 101 100

Payment Real Property Tax
Receivable 124 100
29
Acct.
c. Distribution of Deferred Real Property

Collection Tax Income 448 100
RPT Sharing: Real Property Tax 711 40
Municipal - 40% Due to LGUs 431 60
Province - 35%
Barangay - 25%
d. Deposit of Collections Cash in Bank LCCA 110 100

Cash in Treasury 101 100
e. Remittance of Share Due to LGUs 431 35

(Province) Cash in Bank LCCA 110 35
f. Remittance of Share Due to LGUs 431 25

(Barangay) Cash in Bank LCCA 110 25
B. Books of the
Province
a. Upon receipt of the Due from LGUs 131 35

Summary of the JEV Real Property Tax 711 35
from the Municipal
Accountant
b. Upon receipt of share Cash in Bank LCCA 110 35

Due from LGUs 131 35
2. Operating and Service Income
a. Receipt of Income Cash in Treasury 101 100

Receipts from Markets 783 90
Garbage Fees 772 10
b. Deposit of Collections Cash in Bank LCCA 110 100

3. Share from Internal Revenue Collections
a. Receipt of Notice of Cash in Bank LCCA 110 1,000

Funding Check Issued Share from Internal
from the DBM and Revenue Collections 746 1,000
credit memo from
the bank for Share
from Internal Revenue
Collections
30
Acct.
b. Receipt of Notice of Due from NGAs 130 1,000
Funding Check Issued Share from Internal
from the DBM for Revenue Collections 746 1,000
Share from Internal
Revenue Collections
4. Grants and Donations
a. Receipt of grants and Cash in Treasury 101 100

donations in cash Income from Grants
(Donations in kind and Donations 651 100
shall be booked-up
using the appropriate
asset account)
b. Receipt of grants and Motor Vehicles 218 800

donations in kind - Invested Equity 537 800
Motor Vehicle:
Original Cost P1,000 (At the end of Year)
Less: Acc. Depn. 200 Invested Equity 537 800
Book Value P 800 Government Equity 501 800
5. BORROWINGS
a. Receipt of borrowed Cash in Bank LCCA 110 1,000

funds from bank - Loans Payable
Principal - P1,000 Current, Domestic 403 1,000
Bank Charges - 10 Bank Charges 951 10
Interest Expense- 12 Interest Expenses 952 12
Cash in Bank LCCA 110 22
b. Receipt of borrowed Cash in Treasury 101 1,000

funds from other Loans Payable
agency - Current, domestic 403 1,000
Principal - P1,000 Interest Expenses 952 6
Interest Expense - 6 Cash in Bank LCCA 110 6
c. Payment of loan Loans Payable

amortization Current, Domestic 403 200
Cash in Bank - LCCA 110 200
6. SUBSIDIES
a. Subsidy from Other Funds (General Fund to Special Education Fund)
GENERAL FUND BOOKS
31
Acct.
Transfer of subsidy Subsidy to Other Funds 897 500
to Special Education Cash in Bank LCCA 110 500
Fund (Aid to SEF to
finance its projects)
SPECIAL EDUCATION FUND BOOKS
Receipt of subsidy funds Cash in Treasury 101 500

from Other funds Subsidy from Other
Funds 605 500
b. Special Accounts (subsidy from General Fund proper to Operation of Public

Market)
BOOKS OF GENERAL FUND PROPER
Transfer of subsidy to Subsidy to Special

Special Account Accounts 898 500
BOOKS OF SPECIAL ACCOUNT (OPERATION OF PUBLIC MARKET)
Receipt of subsidy from Cash in Bank LCCA 110 500

General Fund Proper Subsidy from Special
Accounts 606 500
7. REFUND OF CASH ADVANCES
a. Cash Advance by an Officer for Local Travel
a. To take up the cash Due from Officers &

advance Employees 128 10
b. To take up refund of Cash in Treasury 101 10

cash advance Due from Officers &
Employees 128 10
b. Cash Advance by a Disbursing Officer for Salaries and Wages
a. To take up the cash Cash Disbursing

advance Officers 107 10
32
Acct.
b. To take up refund of Cash in Treasury 101 10

cash advance Cash Disbursing
Officers 107 10
8. RECEIPT OF CASH BONDS
a. To take up receipt of Cash in Treasury 101 50

performance bond in Performance/ Bidders/
cash Bail Bonds Payable 414 50
b. To take up deposit of Cash in Bank LCCA 110 50

performance bond Cash in Treasury 101 50
c. To take up refund of Performance/ Bidders/

performance bond Bail Bonds Payable 414 50
D. DISBURSEMENTS
Sec. 37. Disbursements. Disbursements refer to the

settlement of government payables/obligations by cash or by check.
Typical transactions for which disbursements are made are as

follows:
1. Personal Services
2. Maintenance and Other Operating Expenses
3. Capital Outlay
4. Financial Expenses
Disbursements shall be covered by Disbursement Vouchers

(DV) or payrolls and paid either by check or in cash. The Allotment
and Obligation Slip (ALOBS) shall be an integral part of the DV.
Sec. 38. Certification on Disbursements. Disbursements

from the general fund shall require the following certifications on the
DV:
33
1. Certification and approval of vouchers and payrolls as to
validity, propriety 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
temporary absence or incapacity of the department head
or chief of office, the officer next-in-rank shall
automatically perform his function and shall be fully
responsible therefor.
2. Necessary documents supporting the disbursement

vouchers and payrolls as certified to and reviewed by the
Accountant. (Box B of DV)
3. Certification that funds are available for the purpose by

the Local Treasurer. (Box C of DV)
Sec. 39. Approval of Disbursements. Approval of

disbursements by the Local Chief Executive (LCE) himself shall be
required whenever local funds are disbursed, except for regularly
recurring administrative expenses such as: payrolls for regular or
permanent employees, expenses for light, water, telephone and
telegraph services, remittances to government creditor agencies such
as GSIS, BIR, PHILHEALTH, LBP, DBP, NPO, PS of the DBM and
others, where the authority to approve may be delegated.
Disbursement vouchers for expenditures appropriated for the
operation of the Sanggunian shall be approved by the provincial Vice
Governor, the city Vice Mayor or the municipal Vice Mayor, as the
case may be.
Sec. 40. Payments by Check. Checks shall be drawn only

on duly approved disbursement vouchers. It shall be drawn by the
local Treasurer and countersigned by the local Administrator. In case
of temporary absence or incapacity of the aforesaid officials, these
duties shall devolve upon their immediate assistants. In the case of
municipalities where no Administrator has been appointed, checks
shall be countersigned by the municipal Mayor. In case, however, of
expenditures appropriated for the operation of the Sanggunian,
checks drawn shall be countersigned by the provincial Vice
Governor, the city Vice Mayor, or the municipal Vice Mayor, as the
case may be.
34
Sec. 41. Recording Check Disbursements in the
Cashbooks. All checks issued including cancelled checks shall be
recorded chronologically in the Cashbook Cash in Bank.
Sec. 42. Release of Checks. The Treasurer shall release

the check only to the payee or his duly authorized representative. For
purposes of releasing checks, the Treasurer shall maintain a Check
Register where all checks issued shall be recorded chronologically
and where the claimants shall be required to acknowledge receipt
thereof.
Sec. 43. Reporting of Checks Issued. The checks

released to claimants shall be reported in the Report of Checks Issued
(RCI) which shall be prepared daily by the Treasurer for each fund.
It shall be submitted to the Accountant for preparation of Journal of
Entry Voucher based on individual checks issued and recording in the
Check Disbursements Journal.
Sec. 44. Check Disbursement Process. The steps in

disbursements through issuance of check is shown below:

RESPONSIBLE
a. Gather supporting Concerned Office

documents, and approved ALOBS,
prepare DV and forward to Head of
Department.
b. Sign Box A of DV Supervisor/Head

and submit to the Accounting Unit. of Department
c. Check Accounting Unit

completeness of documents, assign
number to DV, sign Box B and
forward to Treasurer.
d. Verify claim, Treasurer

certify cash availability (Box C) and
forward to approving officer.
Note: If funds are not available, return

to Accountant for recording in the
35
RESPONSIBLE
books as Accounts Payable (AP). For
AP, JEV shall be prepared by
Accounting Unit and JEV number
reflected in the DV. JEV for AP is
recorded in General Journal.
Accountant retains copy of DV and
forwards to Treasurer.
e. Approve Local Chief

transaction (Box D) and forward Executive or
DV to Cashier. authorized
approving officer
f. Prepare, sign check Treasurer

and forward check with DV to
countersigning officer.
g. Countersign check Administrator/

and forward to Accountant for Vice-Mayor
preparation of the Accountants for the Local
Advice of Local Check Sanggunian
Disbursements. Disbursements
h. Prepare Accountant
Accountants Advice of Local
Check Disbursements and submit to
bank. Return DV, check and
supporting documents to
Cashier/Treasurer.
i. Record check in the Treasurer

Check Register and release check to
claimant. Record disbursement in
Cashbook Cash in Bank. Prepare
Report of Checks Issued. Forward
RCI with DV and supporting
documents to Accounting Unit.
j. Prepare the JEV Accounting Unit

based on individual checks/voucher;
sign Prepared By portion
36
RESPONSIBLE
(approved by Chief Accountant),
and record JEV in the Check
Disbursements Journal. Post
monthly to the General
Ledger/Subsidiary Ledgers.
k. Forward RCI, DV, Accountant

supporting documents and JEV to
the Office of the Auditor.
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 payments shall be made only
on duly approved payrolls/disbursement vouchers. Cash advances,
by regular and special disbursing officers shall be recorded through a
debit to Cash Disbursing Officers and a credit to Cash in Bank
Local Currency, Current Account (LCCA).
Sec. 46. Reporting of Cash Disbursements. To account

for cash disbursements, from regular and special cash advances, the
Accountable/Disbursing Officer shall prepare the Report of
Disbursements and submit the original and duplicate copy with
vouchers/payrolls/petty cash vouchers to the Accountant. He shall
ensure that receipt of the report and supporting documents, are
properly acknowledged by the Accountant. The Accountant shall
verify the report including the completeness of the supporting
documents, prepare the Journal of Entry Voucher (JEV) and record
the transaction in the Cash Disbursements Journal.
Sec. 47. Cash Advances for Travel. Cash advances for

travel shall be recorded as debit to the account Due from Officers and
Employees and a credit to Cash in Bank Local Currency, Current
Account.
For liquidation of travel where the amount of cash advance is

equal to or more than the travel expenses incurred, the Liquidation
Report form shall be prepared by the officers/employees concerned
and submitted to the accounting unit as basis for preparation of the
JEV to record liquidation. In case the amount of cash advance is
less than the travel expenses incurred, a Disbursement Voucher shall
37
be prepared to liquidate the previous cash advance and serve as a
claim for reimbursement of the deficiency in amount.
Sec. 48. Payments out of the Petty Cash Fund. Petty

cash fund shall be maintained under the imprest system. The fund
shall be sufficient for the non-recurring, emergency and petty
expenses of the LGU for one month. Disbursements from the fund
shall be through the Petty Cash Voucher (PCV) which shall be signed
by the payee to acknowledge the amount received. The official
receipt shall be attached to the PCV.
Petty cash fund shall be set up at the beginning of the year.

An ALOBS shall be prepared for the fund, recorded in the RAAO
and obligated as Other Expenses.
Payments out of the fund shall be made through the use of

PCVs duly supported by official receipts and other required
documents. Each PCV shall not exceed Php1,000.00.
A Disbursement Voucher shall be prepared for

replenishments of the petty cash fund during the year duly supported
by a list/summary of PCVs, the PCVs and its supporting documents.
ALOBS shall be prepared for each replenishment and recorded in the
RAAO based on actual expenses incurred.
At the end of the year, the petty cash fund shall be fully
liquidated by preparing a Report of Disbursement supported by the
list/summary of PCVs, the PCVs and its supporting documents. The
ALOBS setting up the fund at the beginning of the year shall be
cancelled. Another ALOBS shall be prepared taking up the
liquidation and recorded in the RAAO based on the actual expenses
incurred. Unused cash shall be returned to the Treasurer who shall
issue an Official Receipt to acknowledge the amount returned. A new
Cash Advance for Petty Cash Fund shall be set up in the ensuing
year.
Sec. 49. Cash Disbursement Process. Disbursement

process for payment of salaries and wages out of cash advances is as
follows:

RESPONSIBLE
38
RESPONSIBLE
a. Processing of Payrolls to be paid by Concerned
cash is the same as that of steps (a) offices
to (e) for check disbursements.
a. Gather duly certified and approved Office of the

payrolls to be paid out of cash Treasurer
advance. Prepare DV for cash
advance corresponding to the net
amount of payroll/s. Sign Box A of
DV and submit to the Accounting
Unit.
b. Check completeness of documents/ Accounting Unit

previous cash advance liquidated,
assign number to DV, sign Box B
and forward to Approving Officer.
c. Approves DV and forward to Local Chief

Treasurer for preparation of checks. Executive
d. Prepare and sign check, and Treasurer

forward check with DV to
e. Countersign check and forward to Administrator

Accountant for preparation of
Advice.
f. Prepare Accountants Advice of Accountant

Local Check Disbursements and
return DV, check and supporting
documents to Cashier/Treasurer.
g. Encash check and pay claimants. Treasurer/

Record disbursement in Cashbook Disbursing
Cash Advances. Officer
h. Return unused cash to the Disbursing

Treasurer/ Cashier. An official Officer
39
RESPONSIBLE
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.
i. Prepare Report of Disbursement, Disbursing

attach paid payrolls/ supporting Officer
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.
j. Prepare JEV to record the Accountant

liquidation of cash advance.
Record JEV in the Cash
Disbursements Journal (CDJ). Post
monthly to the General Ledger/
Subsidiary Ledger.
k. Forward Report of Disbursement Accountant

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.
Property, plant and equipment acquired through purchase

shall include all costs incurred to bring it to the location necessary for
its intended use, like transportation, freight, installation costs, etc. In
the books of accounts, the purchase is immediately recorded as asset.
40
Property, plant and equipment to be constructed may be
classified as agency assets and public infrastructures. Agency assets
are those to be used by the LGU concerned, like buildings, while
public infrastructures are those to be used by the general public. The
construction period 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 period shall be added to the total cost of the project.
However, liquidated damages charged to the contractor for delayed
completion should be deducted from the total cost.
During the construction period, agency assets and public

infrastructures shall be taken up in the books as "Construction in
Progress with the appropriate asset classification. As soon as the
project is completed, the Construction in Progress for agency asset is
closed to the appropriate asset account.
For public infrastructures funded out of regular income, the

Construction in Progress account is transferred to the Public
Infrastructures account upon completion. At the end of the year, the
latter account is closed to the Government Equity and the asset is
recorded in the Registry of Public Infrastructures (RPI). However,
completed public infrastructures funded out of a loan shall be closed
to the Government Equity account only upon full payment of the
loan. A disclosure of public infrastructures completed funded from
loans shall be made in the Notes to Financial Statements.
Sec. 51. Purchase of Supplies. Purchase of supplies and

materials for stock regardless of whether or not they are consumed
within the accounting period shall be recorded as assets using the
Inventory account following the Perpetual Inventory Method (refer
to Chapter 7 Supplies or Property). However, supplies and
materials purchased out of the Petty Cash Fund for immediate use or
for emergency shall be taken up as expenses.
Sec. 52. Pro-forma Accounting Entries. Pro-forma

accounting entries for disbursement transactions are shown below:
Acct.
1. Payment through Cash Advances
41
Acct.
a. Cash advance for personal services
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 advance Cash Disbursing

for payroll Officers 107 21,000
Cash in Bank LCCA 110 21,000
2. Liquidation of cash Salaries and Wages

advance for payroll Regular Pay 801 18,000
PERA 804 3,000
Additional
Compensation 805 5,000
Withholding Taxes
Payable 410 2,000
GSIS Payable 411 1,500
PAG-IBIG Payable 412 1,500
Cash Disbursing
Officers 107 21,000
Enter obligation in RAAOPS for P1,500 Life and Retirement Insurance

Contributions and P1,500 PAG-IBIG Contributions.
3. Government share for Life and Retirement

life and retirement Insurance
insurance and PAG- Contributions 817 1,500
IBIG Contributions PAG-IBIG
Contributions 818 1,500
PAG-IBIG Payable 412 1,500
b. Petty Cash Fund
For establishment of fund, Enter obligation in RAAOMO as Other Expenses for

P6,000
1. Release of cash Petty Cash Fund 105 6,000

advance for petty Cash in Bank LCCA 110 6,000
cash fund
miscellaneous
expenses
42
Acct.
Enter obligation in RAAOMO for Office Supplies P2,500, Travelling

Expenses P500, Office Equipment Maintenance P1,000 and Other
Expenses of P800.
2. Replenishment of Traveling Expenses

petty cash fund Local 831 500
during the year Office Supplies
Expenses 849 2,500
Office Equipment
Maintenance 882 1,000
Other Expenses 950 800
Enter obligation in RAAOMO for Office Supplies P4,000 and Traveling

Expenses of P1,000.
3. Liquidation at year Traveling Expenses

end Local 831 1,000
Office Supplies
Expenses 849 4,000
Petty Cash Fund 105 5,000
Cancel RAAOMO for setting up of petty cash fund at the start of the year
and refund for a total of P6,000.
4. Return of unused Cash in Treasury 101 1,000

Petty Cash Fund. Petty Cash Fund 105 1,000
c. Cash advance for travel
Enter obligation in RAAOMO for Travel of P1,000
1. Grant of cash advance Due from Officers and

Employees 128 1,000
2. Liquidation of cash Traveling Expenses

advance during the Local 831 900
current year Due from Officers and
(assuming only P900 Employees 128 900
was utilized and P100
was refunded)
Adjust RAAOMO for refund of cash advance of P100
43
Acct.
3. For amount refunded Cash in Bank LCCA 110 100

where official receipt Due from Officers and
was issued Employees 128 100
2. Payment by Check
a. Maintenance and Other Operating Expenses
Sec. 10 Enter obligation in RAAOMO for rent P3,000

1. Payment of rent Rent Expense 841 3,000
Enter obligation in RAAOMO for electricity of P1,500 and

telephone/internet of P2,000
2. Payment of utilities Electricity 835 1,500

(MERALCO and Telephone/Telegraph
PLDT) and Internet 837 2,000
Enter obligation in RAAOMO for training and seminar expenses of P1,000
3. Payment of seminar Training and Seminar

fee Expenses 833 1,000
b. Financial Expenses
Sec. 11 Enter obligation in RAAOFE for bank charges of P300

1. Bank charges upon Bank Charges 951 300
receipt of bank Cash in Bank LCCA 110 300
statement
Sec. 12 Enter obligation in RAAOFE for interest expense of P400

2. Interest Expense Interest Expenses 952 400
44
Acct.
c. Office Equipment Enter obligation in RAAOCO for P6,000 for purchase of

equipment
1. Issuance of PO to No entry
dealer
2. Receipt of office Office Equipment 222 6,000

equipment Cash in Bank LCCA 110 6,000
d. Construction of Roads by Contract Enter obligation in RAAOCO for P800,000

for construction of road.
1. Payment of first Construction in
billing for 50% Progress Roads,
accomplishment Highways and
Bridges 232 400,000
Withholding Taxes
Payable 410 40,000
2. Payment of second Construction in

billing 100% Progress Roads,
accomplishment Highways and
Bridges 232 400,000
Withholding Taxes
Payable 410 40,000
3. Remittance of taxes Withholding Taxes

withheld Payable 410 80,000
Sec. 13If funded from regular agency income

4. To take up roads Public Infrastructure 243 800,000
completed Construction in
Progress Roads,
Highways and
Bridges 232 800,000
5. To transfer completed Government Equity 501 800,000

roads to Registry of Public Infrastructures 243 800,000
Public Infra- structures
at the end of the year
45
Acct.
Note: Using the JEV for the above transactions, the public infrastructures shall
be recorded in the Registry of Public Infrastructures.
Sec. 14If funded from

a loan
6 To record completed Public Infrastructures 243 800,000

roads Construction in
Progress Roads,
Highways and
Bridges 232 800,000
At year end,upon full Government Equity 501 800,000

payment of laon Public Infrastructures 243 800,000
Sec. 15e. General Repair/Construction of Building by Administration
1. Approval of the No entry

project P1M
Enter obligation in RAAOCO for P600,000 for construction materials
2. Issue PO for building No Entry

materials: Lumber,
nails, cement, sand
and gravel, paints,
etc. = P600,000
3. Payment for Construction Materials

construction materials Inventory 156 600,000
received Withholding Taxes
Payable 410 60,000
4. Issuance of materials Construction in

P590,000 Progress Agency
Assets 230 590,000
Construction Materials
Inventory 156 590,000
Sec. 13 Enter obligation in RAAOCO for P380,000 for labor

5. Cash advance granted Cash Disbursing
46
Acct.
to Disbursing Officer Officers 107 350,000
for payroll Cash in Bank LCCA 110 350,000
6. Liquidation by Construction in
Disbursing Officer of Progress Agency
paid payroll Assets 230 380,000
Withholding Taxes
Payable 410 30,000
Cash Disbursing
Officers 107 350,000
7. Remittance of Withholding Taxes 410 30,000

withholding tax Payable
8. Accomplishment Buildings 204 970,000

Report approved by Construction in
the LCE Progress Agency
Assets 230 970,000
Sec. 13
Sec. 14f. Acquisition of Land
Sec. 14 Enter obligation in RAAOCO for P2million for purchase of land

1. Payment made for Land 201 2M
land purchased Withholding Taxes
Payable 410 200,000
Cash in Bank LCCA 110 1.8M
2. Remittance of Withholding taxes

withholding tax Payable 410 200,000
Sec. 13g. Land and Building
Enter obligation in RAAOCO for P600,000 for land and P400,000 for
building
1. Payment of the land Land 201 600,000

and building Building 204 400,000
(assessed value of Withholding Taxes 410 100,000
land is P600,000) for Payable
P1,000,000 Cash in Bank LCCA 110 900,000
47
Acct.
2. Remittance of Withholding Taxes

h. Purchase of Inventories
Enter obligation in RAAOMO for purchase of P2,500 worth of spare arts
1. Payment of delivered Spare Parts Inventory 155 2,500

spare parts Withholding Taxes
Payable 410 250
i. Enter obligation in RAAOMO for purchase of office supplies
1. Payment of office Office Supplies

supplies delivered Inventory 149 3,000
Withholding Taxes
Payable 410 300
j. Fund Transfers
Sec. 15 Enter obligation in RAAOMO for subsidy to LGU XYZ

1. Cash assistance to Subsidy to Local
LGU XYZ Government Units 895 30,000
Sec. 16 k. Enter obligation in RAAOMO for subsidy to SEF

1. Cash transfer to SEF Subsidy to Other
as subsidy Funds 897 10,000
Sec. 13
l. Enter obligation in RAAOMO for grants and donation to Trust Fund
1. Cash transfer to Trust Grants and Donations 889 500,000

Fund as counterpart Cash in Bank LCCA 110 500,000
LGU funds.
48
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.
49
Sec. 55. Grant of Relief from Accountability. When a
request for relief for shortages or loss of funds is granted, a copy of
the decision shall be forwarded to the Chief Accountant who shall
draw a JEV to record the transaction. The loss shall be debited to
the Loss of Assets account and credited to the appropriate
receivable account. In case the request for relief is denied,
immediate payment of the shortage shall be demanded from the
accountable officer. Restitution shall be acknowledged by the
issuance of an official receipt.
In case the request for relief from accountability for loss of

property caused by fire, theft, force majeure or other causes is
granted, a copy of the decision shall likewise be forwarded to the
Chief Accountant for the preparation of the JEV. The loss shall be
debited to the Loss of Assets account and credited to the appropriate
asset account. If request for relief from accountability is denied, the
loss shall be taken up as a receivable from the accountable
officer/persons liable and shall be credited to the appropriate asset
account.
Sec. 56. Cash Overage. In case the cash examination

disclosed cash overage, as determined by the auditor, the amount
shall be forfeited in favor of the government and an official receipt
shall be issued by the collector/teller. The cash overage shall be
taken up as Other Specific Income.
Sec. 57. Dishonored Checks. A check is said to be

dishonored when upon its being duly presented for payment, such
payment is refused or cannot be obtained.
Upon receipt of the debit memo and the dishonored check(s)

from the bank, constructive cancellation of the official receipt
covering the dishonored check shall be immediately effected by the
Treasurer on the copy in his possession. The Treasurer shall
immediately photocopy the dishonored checks and record as credit in
the CashbookCash in Bank and cancel payment in the taxpayers
index card. He shall also notify the collector/teller of the dishonor
and the cancellation of the official receipt. The collector/teller 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.
50
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.
Sec. 59. Spoiled and Stale Checks. Checks may be

cancelled when they become spoiled or stale. A check is considered
spoil when, it is torn, mutilated, defaced or with erasures/errors
affecting the genuineness of any material information contained
therein.
It is stale, if it has been outstanding for over six months from

date of issue or as prescribed by the depository bank. At least one
month before a check becomes stale, the Treasurer shall send a
written notice to the payee of the existence of the check.
A spoiled or stale check shall be marked cancelled on its face

and reported as follows:
51
1. For spoiled checks which are
immediately cancelled and for which the Report of
Checks Issued (RCI) has not yet been prepared, the
cancelled check shall be attached to the RCI and
reported chronologically with the other checks issued
and the word Cancelled shall be indicated on the
report.
2. For stale checks which have

been unclaimed and thus, the original DV and
supporting documents are still with the Treasurer, the
cancelled check shall be presented in the RCI after the
last check issued for the period indicated in the report.
The original DV and supporting documents shall be
returned to the Accountant who shall prepare a JEV to
record the transaction as Accounts Payable.
3. For checks which became

spoiled or stale in the hands of the payee and which
require replacement, a new check may be issued upon
submission of the spoiled or stale check to the
Treasurer. A certified copy of the DV shall be
requested from the Auditor for presentation to the
Administrator/Local Chief Executive who shall
countersign the check. The cancelled check shall be
reported and attached to the RCI prepared at the period
of cancellation. The replacement check shall also be
reported chronologically in the RCI.
Sec. 60. Suspensions, Disallowances and Charges.

Disallowances and charges shall be taken up in the books of accounts
only when they become final and executory. The Accountant shall
prepare the Journal of Entry Voucher (JEV) to take up the Receivable
Disallowances and Charges and credit the appropriate expense
account for the current year or prior years adjustment if pertaining to
expenses of previous years.
Cash settlement of disallowances shall be recorded thru the JEV

by debiting Cash in Treasury and crediting the Receivable
Disallowances and Charges account.
Suspensions in audit and settlement thereof shall not be recorded

in the books of accounts.
52
Sec. 14Sec. 61. Pro-forma Accounting Entries. The
following the are pro-forma accounting entries for miscellaneous
transactions:
Acct.
1. Cash Shortage
a. Cash shortage of the of the Disbursing Officer
To take up cash Due from Officers and

shortage Employees 128 50
Cash Disbursing
Officers 107 50
b. Cash Shortage of the Treasurer
To take up cash Due from Officers and

shortage Employees 128 50
2. Grant of Relief from Accountability for Loss of Government Funds
To record the loss of Due from Officers and

fund by a Disbursing Employees 128 50
Officer (allegedly thru Cash Disbursing
theft ) = P50 Officers 107 50
To take up relief from Loss of Assets (current

accountability year) or Prior
Years adjustments
(prior years) 948 50
Due from Officers and
Employees 128 50
3. Cash Settlement in case of denial of Request for Relief from

Accountability
To take up Cash in Treasury 101 50

payment/settlement Due from Officers and
Employees 128 50
4. Cash Overage
53
Acct.
To take up cash Cash in Treasury 101 50
overage discovered Other Specific Income
during cash of LGU 792 50
examination
5. Dishonored Checks
From payment of real property tax in the current year or prior year
Upon receipt of advice Real Property Tax

of dishonored check Receivable 124 50
and cancellation of Deferred Real
Official Receipt Property Tax
Income 448 50
Due to LGUs 431 30

Real Property Tax
Income 711 20
Receipt of Cash in Treasury 101 50

refund/settlement Real Property Tax
Receivable 124 50
6. Lost/Destroyed/Stale/Obsolete Checks
Check issued in the current/prior year for replacement
Check cancellation Cash in Bank LCCA 110 50

Accounts Payable 401 50
Replacement Accounts Payable 401 50

7. Disallowances and Charges
a. Recording of disallowance for current years transaction
When the disallowance

becomes final and Receivables
executory Disallowances/
Overpayment of Office Charges 138 10
Supplies Office Supplies
Amount paid - P100 Expense 849 10
Should be - 90
54
Acct.
Difference - 10
Settlement of Cash in Treasury 101 10

Disallowance Receivables
Disallowances/
Charges 138 10
b. Recording of disallowance for prior years transaction
When the disallowance Receivables

becomes final and Disallowances/
executory Charges 138 10
Prior Years
Adjustments 533 10
Settlement of Cash in Treasury 101 10

disallowance Receivables
Disallowances/
Charges 138 10
c. Settlement of Charges
c.1 Recording of charges which collection were made in the current year
When the charge

becomes final and Receivables
executory Disallowances/
Underpayment of Charges 138 10
Franchise Tax Franchise Tax 724 10
Amount Paid - P 100
Should be - 110
Charge - 10
Settlement Cash in Treasury 101 10

Receivables
Disallowances/
Charges 138 10
c.2 Recording of charges which collection were made in the prior year
When the charge Receivables

becomes final and Disallowances/
executory Charges 138 10
55
Acct.
Prior Years
Adjustments 533 10
Settlement Cash in Treasury 101 10

Receivables
Disallowances/
Charges 138 10
8. Refund of Overpayment
a. Overpayment taken up as receivable
To record overpayment Due from Officers and

of salaries and wages Employees 128 10
(When overpayment is Salaries and Wages
ascertained) Regular Pay 801 10
To record refund of Cash in Treasury 101 10

overpayment Due from Officers and
Employees 128 10
b. Refund of overpayment not taken up as receivable
Refund of Cash in Treasury 101 10

overpayment of Salaries and Wages
Salaries and Wages Regular Pay 801 10
Regular Pay during the
current year
To take up refund of Cash in Treasury 101 10

over payment in the Prior Years
ensuing year Adjustments 533 10
F. ADJUSTING AND CLOSING ENTRIES
Sec. 62. Adjusting Entries. Adjusting entries are

accounting journal entries made in order to ensure that revenues and
expenses are recorded in the period when they are earned or incurred
following the revenue recognition and the matching principles.
56
Adjusting entries are required every time financial statements
are prepared. The use of the adjusting entries makes it possible to
report on the Balance Sheet the appropriate assets, liabilities and
equity accounts at the statement date and the Statement of Income
and Expenses the net income/(loss) for the period.
Sec. 63. Types of Adjusting Entries. There are two types

of adjusting entries:
a. Prepayments; and
b. Accruals
Sec. 64. Prepayments. Prepayments are expenses paid or

revenues received before they are incurred or earned. Adjusting
entries for prepayments are required at the statement date to record
the portion of the prepayment that represents the expense incurred or
the revenue earned in the current accounting period. Sub-categories
of prepayments are prepaid expenses and unearned revenues.
Prepaid expenses are expenses paid in cash and recorded as

assets before they are used or consumed. Prepaid expenses expire
either with the passage of time (e.g. rent) or through use and
consumption (e.g. supplies). The adjusting entry for prepaid expenses
is a debit to the expense account and a credit to the asset account.
Examples are rent, supplies, etc. Acquisition of productive facilities
is viewed essentially as long term prepayments, hence, periodic
adjusting entries for depreciation are included in this category. For
depreciation, the entry is a debit to depreciation expense and a credit
to accumulated depreciation. The depreciable or estimated life for
different types of agency assets are presented in Table 2 (Annex 7).
Unearned revenues are recorded as a liability when received

and considered earned upon rendition of service (e.g. tuition fees) or
the passage of time (e.g. advance payment of real property taxes).
The adjusting entry for unearned revenues is a debit to a liability
account and a credit to revenue account.
Illustrative accounting entries:
57
Acct.
1. Report of supplies Office Supplies

utilized for P2,000. Expense
849 2,000
Office Supplies
Inventory
149 2,000
2. Application Deferred Credits to

of advance RPT for Income
P2,500. 440 2,500
Real Property Tax
711 2,500
Sec. 65. Accruals. Accruals are revenues earned and

expenses incurred in the current accounting period that have not yet
been recorded. Adjusting entries for accruals are required to record
revenues earned and expenses incurred in the accounting period.
Adjusting entry for accrued revenues is a debit to a

receivable account and a credit to an income account. Examples are
interest, share from internal revenue collections covered by notice of
funding checks issued, etc.
Adjusting entry for accrued expenses is a debit to the

appropriate expense account and a credit to a payable account.
Examples are accrued salaries, bad debts, etc. For bad debts, the
entry is a debit to Bad Debts Expense and a credit to Allowance for
Doubtful Accounts.

Acct.
1. Receipt of the Due from NGAs 130 20,000
58
Acct.
Notice of Funding Share from Internal
Check Issued for
the December Revenue Collections 746 20,000
Share from
Internal Revenue
Collections for
P20,000.
2. Unpaid salaries and Salaries and Wages

wages of employees, Regular Pay
at end of accounting 801 50,000
period, P50,000. Due to Officers &
Employees
428 50,000
Sec. 66. Closing Journal Entries. Closing journal entries

are the accounting entries prepared to reduce all balances of the
nominal accounts to zero at the end of the accounting period in order
to prepare the accounts for the next accounting period. The
procedure followed in the reduction of the balances is called the
closing process. The closing process is as follows:
1. Debit all revenue accounts balances and

credit the total to the Income and Expense
Summary account.
2. Credit all expense accounts balances and
cost of goods sold and debit the total to the
Income and Expense Summary account.
3. Debit the credit balance of the Income and
Expense Summary account and credit the
amount in the Retained Operating Surplus
account, in case of a net income.
4. Credit the debit balance of the Income and
Expense Summary account and debit the amount
in the Retained Operating Surplus account, in
case of a net loss.
59
5. Debit all credit balances of the intermediate
accounts and debit the total to the Government
Equity account.
6. Credit all debit balances of the intermediate
accounts and credit the total to the Government
Equity account.

Acct.
1. To close the Revenue Real Property Tax 711 100

accounts to the
Income and Expense Share from Internal
Summary account. Revenue Collections
746 10,000
Business Taxes &

Licenses
Registration Fees 723 50
Income and Expense 761 20
Summary
532 10,170
2. To close the Income and Expense

Income and
Expense Summary Summary 532 5,670
to Retained Retained Operating
Operating Surplus Surplus
account. 534 5,670
3. To close the Retained Operating

Retained Operating Surplus
Surplus to 534 5,670
Government Equity Government Equity
501 5,670
account.
60
Acct.
Sec. 17 Chapter 4. TRIAL BALANCE, FINANCIAL REPORTS

Sec. 13AND STATEMENTS
Sec. 67. Trial Balance. Trial balance is a list of all the

general ledger accounts and their balances at a given time. The
accounts are listed in the order in which they appear in the ledger,
with the debit balances in the left column and credit balances on the
right column.
Sec. 68. Purpose of the Trial Balance. The trial balance

is prepared:
a. To prove the mathematical equality of the debits

and credits after posting;
b. To uncover errors in journalizing and posting; and
c. As basis for the preparation of the financial
statements.
61
Sec. 69. Procedures in the Preparation of the Trial
Balance. The procedures in trial balance preparation shall be:
a. List the account titles and their debit/credit

balances based on the accounts and amount
reflected in the general ledger;
b. Total the debit and credit columns; and
c. Prove the equality of the two columns.
Sec. 70. Pre-Closing Trial Balance. The pre-closing trial

balance is the trial balance prepared from the general ledger accounts
after the adjusting journal entries have been journalized and posted.
This is also termed as adjusted trial balance.
Monthly pre-closing trial balance for each fund shall be

submitted not later than the twentieth day after the end of the month.
It shall be supported by the Status of Appropriations, Allotments and
Obligations, for both the current and continuing appropriations.
These reports shall be submitted to the following:
COA Unit Auditor Original copy

Local Sanggunian 1 copy
Local Treasurer 1 copy
Local Accountant 1 copy
The trial balance at the end of the quarter shall also be

supported by a schedule of 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.
Sec. 71. Status of Appropriations, Allotments and

Obligations. The status of appropriations, allotments and
obligations is a schedule prepared showing the appropriation,
allotments and obligations of each function, program project and
activity (See Annex 1). Separate schedules shall be prepared for
62
current appropriation and for continuing appropriations using the
following column headings:
Function/Program/ Appropriations Allotment Obligation Unobligated

Project/ Activity Balance
Sec. 72. Post-closing Trial Balance. Post-closing trial

balance is the trial 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
accounts (revenue, expense and intermediate) are closed and the
real accounts (assets, liability and equity) are shown with
balances. It shall be submitted not later than the fourteenth day
of February after the end of the calendar year with the following
supporting schedules:
a. Status of Appropriations, Allotments and

Obligations;
b. Subsidiary Schedule of General Ledger account
balances; and
c. Summary of Public Infrastructures (Annex 8).
The post-closing trial balance with supporting schedules

shall be distributed as follows:
COA Central Office thru the Unit Auditor 1 copy

COA Regional Office 1 copy
COA Unit Auditor 1 copy
Local Chief Executive 1 copy
Local Sanggunian 1 copy
Local Treasurer 1 copy
Local Accountant 1 copy
Sec. 73. Interim Reports. Interim reports are financial

statements required to be prepared at any given period or at a
financial reporting period shorter than a full financial year, without
closing the books of accounts. The following interim financial
statements and the Notes to Financial Statements shall be prepared
and submitted quarterly:
a. Balance Sheet;
63
b. Statement of Income and Expenses; and
c. Statement of Cash Flows
The interim reports shall be prepared employing the same
accounting principles used for annual reports. Adjusting entries shall
be prepared for the interim period.
To facilitate the preparation of the interim financial

statements, the use of the worksheet is recommended.
Sec. 74. Worksheet. A worksheet is the accountants

informal device for 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 financial statements.
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 timely basis. The following
worksheet format shall be used:
Name of LGU
Worksheet
As of ____________, 20_____
Statement
of Income
Accounts Trial Adjustments Adjusted & Balance
Balance Expenses Sheet
T/B
Title Code Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
1. Account title and code columns show the account

titles/codes of the general ledger accounts.
64
2. Trial balance column reflects amounts obtained from the
general ledger balances.
3. Adjustment columns are the adjustments effected for the
prepayments and accruals.
4. Adjusted trial balance shows the balances of all the
accounts after the adjustment at the end of the accounting
period.
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 difference between
the income and expenses shall be reflected as Net
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 balance of all the asset, liability, equity and
intermediate accounts affecting directly the Government
Equity account.
Sec. 75. Statement of Management Responsibility for

Financial Statements. Statement of Management Responsibility for
Financial Statements (Annex 2) shows the agencies responsibility for
the preparation and presentation of 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
part of the financial statements, all of which shall be transmitted to
the concerned agencies.
Sec. 76. Year-end Financial Statements. Local

accountants shall prepare at the end of the year the following
financial statements for each fund:
a. Balance Sheet;
b. Statement of Income and Expenses; and
The Chief Accountant shall likewise prepare the

consolidated financial statements for all funds and the Notes to the
Financial Statements.
65
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 agencys 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 accountants 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;
66
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.
67
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.
68
(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:
69
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/Taxpayers 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.
Sec. 86. Collection Procedures for the Special Education Tax.

The additional one percent (1%) tax on real property shall be
collected simultaneously with the basic real property tax. A
single official receipt shall be issued for both taxes, 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 the two taxes. Further, the
proceeds of the additional one per cent tax shall be deposited in a
separate depository account.
Procedures for the turn over of collections, frequency of

deposit of collection with the bank, preparation of report of
collections, verification of collections and accountable forms,
preparation of report of accountability for accountable forms as
well as consolidation of reports of accountable forms shall be the
same as that prescribed for collections in the General Fund.
70
Sec. 87. Separate Cashbooks for Special Education Fund.
The Treasurer and/or the concerned accountable officers shall
maintain separate cashbooks for the SEF which shall be in
accordance with the prescribed format.
Sec. 88. Separate Registries, Books of Accounts, and

Financial Reports for Special Education Fund. The Chief
Accountant shall maintain separate registries for appropriation,
allotment and obligations and books of accounts for SEF. He
shall likewise prepare separate financial reports such as the Trial
Balance, Balance Sheet, Statement of Income and Expenses,
Statement of Cash Flows and supporting schedules, to be
submitted within the prescribed timeframe.
For disbursements, separate set of JEVs shall also be

prepared which shall be numbered in accordance with the
prescribed codes.
Sec. 89. Preparation and Control of ALOBS for Special

Education Fund. 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 budget, shall verify the existence of
appropriation for the proposed expenditure. He shall certify the
ALOBS to that effect and number the same in accordance with
the prescribed codes. This shall then be forwarded to the Chief
Accountant who shall certify as to obligations of allotments and
shall record the same in the appropriate Registry of
Appropriations, Allotments and Obligations (RAAO). The
ALOBS shall form an integral part of the disbursement
voucher/payroll and the certifications of the local budget officer
and the accountant thereon shall serve as their certification of the
disbursement as required by law.
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 to cash availability in the contract. This
71
certification shall serve as the required certification under the
law.
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 Executive concerned as co-chairman of the local
school board. The division/city 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 involved.
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 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.
Sec. 93. Pro-forma Accounting Entries. Pro-forma

accounting entries for the fund, follows:
SPECIAL EDUCATION FUND (SEF)

Acct.
1. Set-up Special Special Education Tax

education Tax Receivable 125 500,000
Receivable Deferred Special
Total Receivables Education Tax
P500,000 Income 449 500,000
Provincial Share
P250,000
2. Collection of Special Cash in Treasury 101 200,000

Education Tax Special Education
P200,000. Tax Receivable 125 200,000
72
Acct.
Computation of Shares Deferred Special

of LGUs in RPT Education Tax
50% of Income 449 200,000
P200,000 for Special Education Tax
Provincial 713 100,000
Share Due to LGUs 431 100,000
3. Deposit of collections Cash in Bank 110 200,000

with authorized 101 200,000
depository bank LCCA
Cash in Treasury
4. Remittance of share to Due to LGUs 431 100,000

Province ( Special (Province)
Education Tax) Cash in Bank LCCA 110 100,000
P100,000
5. Receipt of allotment for Memo entry in

Allotment Class: Registry of
Personal Services - Appropriations ,
P50,000 Allotments and
MOOE - Obligations (Personal
20,000 Services (RAAOPS,
Capital Outlay - MOOE RAAOMO,
30,000 Capital Outlay
Total P100,000 RAAOCO)
6. Obligation for PS Memo entry in

Salaries of teachers for RAAOPS
extension class
P30,000
7. Grant of cash advance Cash Disbursing

for payroll Officers 107 25,000
110 25,000
Cash in Bank LCCA
8. Payment of Salaries Salaries and Wages

Salaries per Payroll Regular Pay 801 30,000
P 30,000 Cash Disbursing
73
Acct.
Less: Deductions Officers 107 25,000
(Personal Share) Withholding Taxes
Life & Ret. P 2,850 Payable 410 1,050
Pag-ibig 600
PhilHealth 500 GSIS Payable 411 2,850

W/holding Tax 1,050 PAG-IBIG Payable 412 600
5,000 PHILHEALTH
Net Pay per Payroll Payable 413 500
P25,000
9. Remittance of salary Withholding Taxes

deductions Payable 410 1,050
PAG-IBIG Payable 412 600
PHILHEALTH
Payable 413 500
10. Obligation for Memo entry in

Government Share: RAAOPS
Life & Ret. Ins.
Contributions
P2,850
Pag-ibig
Contributions
600
PhilHealth
Contributions
500
Total P3,950
11. Payment of Life & Retirement

Government Share Insurance
PAG-IBIG
Contributions 818 500
PHILHEALTH
12. Obligation of Memo entry in

Traveling Expenses RAAOMO
P500
74
Acct.
13. Grant of cash advance Due from Officers &

Employees 128 500
14. Liquidation of cash Traveling Expenses

advance Local 831 480
Due from Officers &
Employees 128 480
15. Adjustment of Memo entry in

obligation of travel. RAAOMO
16. Refund of cash Cash in Treasury 101 20

advance Due from Officers &
Employees 128 20
17. Deposit of cash refund Cash in Bank LCCA 110 20

18. Obligation of bill Memo entry in

received from RAAOMO
MERALCO
19. Payment of Electricity 835 800

MERALCO bill Cash in Bank LCCA 110 800
P800
20. Obligation for the Memo entry in

purchase of Office RAAOMO
Supplies P500
21. Payment of office Office Supplies

supplies Inventory 149 500
Withholding Taxes
Payable 410 20
22. Obligation of Memo entry in

Equipment per RAAOCO
75
Acct.
Purchase Order
P30,000
23. Payment of equipment Office Equipment 222 30,000

with Invoice/Delivery Withholding Taxes
Receipt Payable 410 3,000
24. Receipt of fund Cash in Bank LCCA 110 5,000

transfer from General Subsidy from Other
Fund thru bank Funds 605 5,000
Adjusting Entries:
1. Depreciation of DepreciationOffice
Equipment using the Equipment 922 6,000
Straight Line Method: Accumulated
Equipment : Depreciation
Life Amount Office Equipment 322 6,000
5 yrs. P6,000
Closing Entries :
1. Closing of Income Special Education Tax 713 100,00

0
Accounts Subsidy from Other
Funds 605 5,000
Income and Expense
Summary 532 105,000
2. Closing of Expense Income and Expense

Accounts Summary 532 41,230
Salaries & Wages
Regular Pay 801 30,000
Life & Retirement
Insurance
PAG-IBIG
PHILHEALTH
Traveling Expenses
76
Acct.
Local 831 480
Electricity 835 800
DepreciationOffice
Equipment 922 6,000
3. Closing of Income and Income and Expense 532 63,770

Expense Summary Summary
Retained Operating
Surplus 534 63,770
4. Closing of Retained Retained Operating

Operating Surplus Surplus 534 63,770
Government Equity 501 63,770
B. TRUST FUND
Sec. 94. Definition of Trust Fund. Trust Fund shall

consist of private and public monies which have officially come into
the possession of the local government or of a local government
official as trustee, agent or administrator, or which have been
received as a guaranty for the fulfillment of some obligation. A trust
fund shall only be used for the specific purpose for which it was
created or for which it came into the possession of the local
government unit.
Sec. 95. Receipts Accruing to the Trust Fund. Grants

and donations coming from foreign funding institutions, other levels
of government and private institutions/individuals for specific
projects/purpose shall accrue to the Trust Fund. Equity of the LGU
on projects under a trust agreement shall also accrue to the Trust
Fund. These receipts shall be credited to the Project Equity account.
Loans of LGUs for income generating projects from the

Municipal Development Fund Office (MDFO) requiring counterpart
funding from LGUs shall not be recorded in the Trust Fund but as a
Special Account in the General Fund.
Sec. 96. Collection Procedures for the Trust Fund. Cash

collections for the Trust Fund shall be acknowledged through the
77
issuance of an official receipt. Procedures for the turn over of
collections, frequency of deposit of collection with the bank,
preparation of report of collections, verification of collections and
accountable forms, preparation of report of accountability for
accountable forms as well as consolidation of reports of
accountable forms shall be the same as that prescribed for
collections in the General Fund.
In case of receipt of funds through the bank, the

Accountant shall draw a JEV based on the bank credit memo.
Sec. 97. Project Expenditures. The construction period

theory shall apply for expenditures on infrastructure projects of
the Trust Fund. For other projects, expenditures shall be debited
to the appropriate expenditure account. Expenditures shall be
closed to Project Equity account at year-end or upon project
completion, whichever comes first.
Sec. 98. Separate Cashbooks for Trust Fund. The

Treasurer and/or the concerned accountable officers shall
maintain separate cashbooks for the Trust Fund which shall be in
accordance with the prescribed format.
Sec. 99. Separate Books of Accounts and Financial Reports

for Trust Fund. The Chief Accountant shall maintain separate
books of accounts for Trust Fund. He 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.
Sec. 100. Disbursements within Trust

Agreement/Approved Budget. Disbursements from trust funds
shall be in accordance with the specific purpose stated in the trust
agreement/approved budget between the trustor and 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.
78
Sec. 101. Certification and Approval of Disbursements
from Trust Funds. Disbursements from the Trust Fund shall
require:
a. Certification and approval of vouchers and

payrolls as to validity, propriety and legality of the
claim involved by the department/ office head
concerned;
b. Certification as to existence of funds held in
trust and completeness and propriety of supporting
documents by the Accountant;
c. Certification as to cash availability by the
Treasurer; and
d. Approval by the Administrator of the fund.
Sec. 102. Disbursement Process. Disbursements from the

Trust Fund shall be as follows:
a. Disbursement by check

RESPONSIBLE
1. Gather supporting documents, Concerned Office

prepare DV/payroll and
forward to Head of
Department.
2. Sign Box A of DV and submit Supervisor/Head of

to the Accounting Unit. Department
3. Check completeness of Accounting Unit

documents and verify existence
of funds held in trust, assign
number to DV/Payroll, sign
Box B and forward to
Treasurer.
4. Verify claim, certify cash Treasurer
79
RESPONSIBLE
availability (Box C) and
forward to approving officer.
5. Approve transaction (Box D) Local Chief

and forward DV to Cashier. Executive/
Administrator of
the Fund
6. Prepare and sign check and Treasurer

forward check with DV to
7. Countersign check and forward Administrator

to Accountant for preparation of
the Accountants Advice.
Accountant
8. Prepare Accountants Advice of
Local Check Disbursements and
return DV, check and supporting
documents to Cashier/Treasurer.
9. Issue check to claimant. Record Treasurer

disbursement in Cashbook
Cash in Bank. Prepare Report of
Checks Issued (RCI), forward
RCI with DV and supporting
documents to Accounting Unit.
10. Prepare the JEV based on Accounting Unit

individual checks/voucher; sign
Prepared By portion (approved
by Chief Accountant), and
record JEV in the Check
80
RESPONSIBLE
Disbursements Journal. Post
monthly to the General
Ledger/Subsidiary Ledgers
11. Forward RCI, DV, supporting Accountant

documents and JEV to the Office
of the Auditor for final custody
and post audit.
b. Payments through cash advances
For payments through cash advances, procedures 1 to 5

for check disbursement shall be followed. The rest of the
procedures shall be the same as that of the General Fund.
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.
Sec. 104. Pro-forma Accounting Entries for Trust Funds.

Accounting entries for typical transactions under the trust funds are
as follows:
Acct.
1. Receipt of grant from NGA
a. Receipt of grant
direct to bank from
NGA for:
a. Construction of Cash in Bank LCCA 110 2,500,000
81
Acct.
road P2M Project Equity
b. Purcha 502-01 P2,500,000 502 2,500,000
se of
construction
Equipment
P500,000
b. Issuance of check Construction in

with approved DV Progress
for payment to Roads, Highways &
contractor upon Bridges 232 1,000,000
receipt of first Withholding Taxes
billing 50% Payable 410 100,000
accomplished Cash in Bank LCCA 110 900,000
c. Submission of No entry
statement of
disbursements to
grantor
d. Issuance of check Construction in

with approved DV Progress Roads,
for payment to Highways &
contractor upon Bridges 232 1,000,000
receipt of second Withholding Taxes
billing 100% Payable 410 100,000
accomplished Cash in Bank LCCA 110 900,000
e. Transfer of Public Infrastructures 243 1,000,000

completed Construction in
construction to Progress
Public Roads, Highways
Infrastructure & Bridges 232 1,000,000
f. Remittance of taxes Withholding Taxes

w/held Payable 410 200,000
g. Purchase of Construction and
82
Acct.
equipment Heavy Equipment 212 500,000
Withholding Taxes
Payable 410 50,000
h. Payment of Withholding Taxes

i. Submission of full Project Equity 502 2,500,000

liquidation to Public Infrastructures 243 2,000,000
grantor and transfer Construction and
of completed road Heavy Equipment 212 500,000
and equipment to
GF for LGU use
Note: Under the GF books, completed infrastructure project shall be

recorded in the Registry of Public Infrastructures with the TF JEV No. as
basis. The transferred equipment shall be recorded as follows:
General Fund Books: Public Infrastructures 243 2,000,000
Construction and
Heavy Equipment 212 500,000
Invested Equity 537 2,500,000
At the end of the year:
a. Closing of Invested Invested Equity 537 2,500,000

Equity to Government Equity 502 2,500,000
Government Equity
b. Transfer of Public Government Equity 502 2,000,000

Infra- structure to Public Infrastructures 243 2,000,000
RPI
Sec. 18 2. Receipt of grant with counterpart fund from LGU
a. Project
budget as
agreed upon
between
grantor and
LGU for
project:
83
Acct.
Grantor
Building - 1.2M
Equipment - .3M
LGU Funded
Office supplies -1M
Salaries of project
Personnel - .4M
Total 2M
b. Receipt of funds Cash in Bank LCCA 110 2,000,000

from foreign Project Equity 502 2,000,000
funding institution 502-01 - 1,500,000
thru national 502-02 - 500,000
government agency
Note: Entry in LGU General Fund books shall be
Grants and Donations 889 500,000

c. Issuance of check Construction in

for payment to Agency Assets 230 500,000
contractor for Withholding Taxes
Construction of Payable 410 50,000
Building, 50% Cash in Bank LCCA 110 450,000
accomplished.
d. Remittance of Withholding Taxes

e. Issuance of check Cash Disbursing

with approved DV Officers 107 170,000
for cash advance on Cash in Bank LCCA 110 170,000
salaries and wages
of project
administrative
personnel
84
Acct.
f. Liquidation of Cash Salaries and Wages

Advances Casual/
Contractual 803 200,000
Withholding Taxes
Payable 410 30,000
Cash Disbursing
g. Remittance of tax Withholding Taxes

withheld Payable 410 30,000
h. Issuance of check Office Supplies

with approved DV Inventory 149 100,000
for purchase of Cash in Bank LCCA 110 100,000
supplies and
materials
i. Issuance of office Office Supplies

supplies Expenses 849 60,000
Office Supplies
j. Purchase of IT IT Equipment and

equipment Software 215 250,000
Withholding Taxes
Payable 410 25,000
k. Remittance of Withholding Taxes

l. Issuance of check IT Equipment and

for installation of Software 215 50,000
equipment Cash in Bank LCCA 110 50,000
85
Acct.
End of Year
m.Closing. of expenses Project Equity 502 260,000
to Project Equity 502-02 - P260,000
Salaries and Wages
Casual/ Contractual 803 200,000
Office Supplies
Expenses 849 60,000
Sec. 19 Succeeding
year
n. Issuance of check Construction in
for payment to Agency Assets 230 700,000
contractor for Withholding Taxes
Construction of Payable 410 70,000
Building 100% Cash in Bank LCCA 110 630,000
accomplished.
o. Remittance of Withholding Taxes

p. Transfer of Property Plant and

construction in Equipment
progress to property, Building 204 1,200,000
plant and equipment Construction in
account Progress Agency
Assets 230 1,200,000
q. Issuance of check Cash Disbursing

for cash advance on Officers 107 170,000
salaries and wages Cash in Bank LCCA 110 170,000
r. Liquidation of Salaries and Wages

salaries and wages Casual/Contractual 803 200,000
Withholding Taxes
Payable 410 30,000
Cash Disbursing
s. Remittance of Withholding Taxes

86
Acct.
t. Issuance of office Office Supplies

supplies Expenses 849 40,000
Office Supplies
End of Year
u. Closing of Project Equity 502 240,000
expenses to Salaries and Wages
Project Equity Casual/
Contractual 803 200,000
Office Supplies
Expenses 849 40,000
Project Completion
v. Transfer of Project Equity 502 1,500,000
buildi Building 204 1,200,000
ng IT Equipment and
and Software 215 300,000
equip
ment
to the
Gene
ral
Fund
as
follow
s:
General Fund Books: Building 204 1,200,000

IT Equipment and
Software 215 300,000
Invested Equity 537 1,500,000
At end of year: Invested Equity 537 1,500,000

Government Equity 501 1,500,000
87
Chapter 6. SPECIAL ACCOUNTS
Sec. 105. Special Accounts in the General Fund. Local

government units 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 government
concerned from the internal revenue collections and development of
national wealth and such other special accounts which may be
created by law or ordinance.
Sec. 106. Objectives for the Maintenance of Special

Accounts. Accounting procedures for the operation of the special
accounts are adopted in order to:
88
a. Determine whether the income generated by the
public utilities or economic enterprises are
sufficient to meet their respective operating costs.
b. Provide adequate information as to the assets,

liabilities and equity of each special account.
Sec. 107. Special Accounts Subsidiary Ledger. Special

accounts shall be 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 market).
Sec. 108. Sub-codes for the Special Accounts. The

following shall be the sub-codes for the special accounts:
SPECIAL ACCOUNT SUB-CODE

General Fund Proper 01
Market Operation 02
Slaughterhouse Operation 03
Waterworks System 04
Electric, Light and Power System 05
Telephone System 06
Toll Roads, Bridges and Ferries 07
Transportation System 08
Hospital 09
School 10
Sports Center 11
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
Share from Development of National Wealth 20
Loans 21
89
SPECIAL ACCOUNT SUB-CODE
Sec. 13Interests 22
Sec. 14Bond Issues 23
Sec. 109. Profit from Operation. Profits or income

derived from the operation of public utilities and other economic
enterprises, after deduction of the cost of improvement, repair and
other related expenses of the public utility or economic 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 government unit concerned.
Sec. 110. Reporting. At the end of the year, post-closing

trial balance shall be prepared for each special account. Also, the
following financial statements shall be prepared:
a. Balance Sheet
b. Statement of Income and Expenses
These reports shall form part of the schedules of the General

Fund trial balance.
90
Sec. 111. Pro-forma Accounting Entries.
Sec. 22 Sec. 24
Sec. 20 Acct. Sec. 23 Sec. 25
Sec. 21 Transaction Code Debit Credit
a. Receipt of Share from IRC for P100,000.

Cash in Bank LCCA (01) P80,000
(18) 20,000
Share from Internal Revenue Collections (IRC) 746 100,000
Share from IRC (01) 80,000
(18) 20,000
b. Receipt of collections for P148,500.

Distribution:
RPT- Basic 58,500 (net of 10% discount)
Market fees 40,000
Bus. Tax 50,000
Cash in Treasury 101 148,500

Cash in Treasury (01) 108,500
Cash in Treasury (02) 40,000
Discount on RPT 937 6,500
Discount on RPT (01) 6,500
RPT Receivable 124 65,000
RPT Receivable (01) 65,000
Business Taxes & Licenses 723 50,000
Business Taxes & Licenses (01) 50,000
Receipts from Markets 783 40,000
Receipts from Markets (02) 40,000
c. Requisition of Office Supplies for the following:

Operation of Market P10,000 No accounting entry
Programs under the 20% Dev. Fund 2,000
Office of the Treasurer 8,000
d. Obligation of the requested supplies. Entry in the RAAOMO
e. Payment of Office Supplies for the following:

Operation of Market P10,000
Programs under the 20% Dev. Fund 2,000
Total 20,000
Less: Withholding tax 1,000
Net 19,000
91
Sec. 22 Sec. 24
Office Supplies Inventory 149 20,000

Office Supplies Inventory (01) 8,000
Cash in Bank - LCCA (01) 7,600
Withholding Taxes Payable 410 1,000
Withholding Taxes Payable (01) 400
f. Report of Utilization of Office Supplies

Operation of Market 2,000
20% Dev. Fund 1,000
Office Supplies Expenses 849 6,000

Office Supplies Expense (01) 3,000
Office Supplies Inventory 149 6,000
g. Request for procurement of office equipment

of the following offices.
Office of the Accountant 5,000 No accounting entry
Office of the Market Master 4,000
h. Obligation of the requested equipment Entry in the RAAOCO
92
Sec. 22 Sec. 24
i. Payment of the procured equipment:

Office of the Accountant 4,800
Office of the Market Master 4,000
Gross 8,800
Withholding Tax 440
Net 8,360
Office Equipment 222 8,800
Office Equipment (01) 4,800
Office Equipment (02) 4,000
Withholding Taxes Payable 410 440
Cash in Bank LCCA (01) 4,560
j. Obligation of Subsidy to the Operation of the

Market from the GF Proper for P12,000 Entry in the RAAOMO
k. Transfer of the funds for P12,000.

Subsidy to Special Accounts 898 12,000
Subsidy to Special Accounts (01) 12,000
l. Receipt of the transferred funds.

0
Subsidy from Special Accounts 606 12,000
Subsidy from Special Accounts (02) 12,000
93
Chapter 7. SUPPLIES OR PROPERTY
94
ACCOUNTING FOR SUPPLIES OR PROPERTY
Sec. 112. Definition of Supplies or Property. Supplies or

property include everything, except real property, which may be
needed in the transaction of public business or in the pursuit of any
undertaking, project or activity, whether in the nature of equipment,
furniture, stationery, materials for construction or personal property
of any sort, including non-personal or contractual services such as the
repair and maintenance of equipment and furniture, as well as
trucking, hauling, janitorial, security, and related services. ( Sec.
356c of the LGC)
Sec. 113. Classification of Supplies or Property. Supplies

or property shall have the following classification:
a. Expendable supplies or property referring to articles

which are normally consumed in use within one year or
converted in the process of manufacture or construction,
or those having a life expectancy of 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.
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.
c. Non-personal services includes, but is not limited to

repairing, cleaning, redecorating, and furnishing of
necessary repair parts or other supplies as part of the
services performed. Examples are contractual services
like trucking, hauling, janitorial, security and related
services. Non-personal services are proper charges to
maintenance and operating expenses of the LGU.
95
Sec. 114. Perpetual Inventory Method. Purchase of
supplies and materials for stock, regardless of whether or not they are
consumed within the accounting period, shall be recorded as
inventory following the perpetual inventory method. Under the
perpetual inventory method, an inventory control account is
maintained in the General Ledger on a current basis. In addition,
detailed inventory records are maintained for each inventory item.
Regular purchases shall be coursed thru the inventory

account and issuances thereof shall be recorded as they take place,
except those purchased out of the petty cash fund which shall be for
immediate use and for stock in which case shall be charged
immediately to the appropriate expense accounts.
The Chief Accountant shall maintain the perpetual inventory

records comprising of Supplies Ledger Cards (SLC) for each
commodity/stock, Property, Plant and Equipment Ledger Card
(PPELC) for each category of plant, property and 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 property, plant and equipment and livestock
account in the inventory control account in the general ledger.
The General Services Officer or the Municipal Treasurer, as

the case maybe shall likewise maintain stock cards and property
cards for supplies; property, 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 always reconcile
with the ledger cards of the accounting unit. They should also
reconcile with other property records like Acknowledgement Receipt
for Equipment (ARE).
Sec. 115. Moving Average Method. The moving average

method of costing shall be used for costing inventories. This is a
method of calculating cost of inventory on the basis of weighted
average on the date of issue. The Chief Accountant shall compute the
inventory cost monthly using the method. Illustrative calculation of
inventory using this method is as follows:
Ball pen
Reference Date Received Issued Balance

Beg. Balance
per actual Jan. 1 200 @
inventory P10 P2,000
96
Delivery Jan 12 400 @
Receipt/ 12 4,800 600 @
Invoice No. 11.33 6,800
RIS No. Jan. 16 500 @ 100 @
11.33 5,665 11.35 1,135
Delivery Jan. 26 300 @ 400 @
Receipt/ 11 3,300 11.09 4,435
Invoice No.
RIS No. Jan. 29 200 @
11.09 2,218 200 2,217
@11.09
Delivery 100 @ 1,200 300 @
Receipt/ Jan. 30 12 11.39 3,417
Invoice No.
(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, P1,135 represented the previous
balance P6,800 less P5,665, the cost assigned to the 500 units issued
on this date. New unit costs were calculated on Jan. 26 and 30 when
additional units were acquired. )
Sec. 116. Requisition Procedures. (a) Requirement of

Requisition - Any order for supplies shall be filled by the provincial
general services officer, the city general services officer, or the
municipal treasurer, as the case maybe, for any office or department
of the LGU concerned only upon written requisition.
(b) Forms to be used - Requisitions shall be accomplished

using the following forms:
(1) Requisition Issue Slip (RIS) - for supplies carried in

stock; and
(2) Purchase Request (PR) - for supplies not carried in
stock.
(c) Preparation of Requisition - At the beginning of the year,

the Office of the General Services Officer (GSO) or the Municipal
Treasurer, as the case maybe, shall prepare a PR for supplies and
materials needed for the quarter based on the approved Annual
Procurement Program. Subsequent requisition from stock shall be
made by the head of office or department needing the supplies. A
Supplies Availability Inquiry (SAI) shall be used to inquire as to
availability of supplies needed from the Office of the Chief
97
Accountant. If supplies are available, the RIS shall be prepared and
submitted to the GSO/Local Treasurer for the issuance of supplies. If
the supplies needed are not available from stock, a PR shall be
prepared.
The head of office or department needing the supplies shall

certify as to their necessity for official use and shall specify the
project or activity where the supplies or property are to be used.
(d) Certification on Allotment and Obligation Slip (ALOBS) -

Every PR must be accompanied by an ALOBS showing the
certification of the local budget officer and the local accountant, that
an appropriation therefore exists; and that the estimated amount of
such expenditure has been obligated. The Local Treasurer shall
certify as to cash availability in the purchase request.
(e) Approval of Requisitions - Approval of requisitions by

the head of office or department concerned who has administrative
control of the appropriation against which the proposed expenditure
is chargeable is deemed sufficient, except in case of requisition for
supplies to be carried in stock which shall be approved by the local
chief concerned.
Sec. 117. Issuance of Purchase Orders or Contract.

Immediately after the LGU has performed all the required procedures
adopting a particular mode of procurement, a purchase/letter order or
contract shall be issued.
The date when the purchase/letter order was received by the

supplier or contractor shall be indicated clearly.
The purchase order or contract shall be released only to, and

signed for by, the awardee or his duly authorized representative.
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
98
the case maybe before inspection. Inspection of purchases shall be
made by the authorized inspector/s for conformity with specification
in the order. Acceptance and inspection shall be made using the
Acceptance and Inspection Report (AIR).
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 maintain Stock Cards per
stock number. He shall likewise maintain Property Cards per
category of property, plant and equipment.
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 preparation of the
DV and recording of deliveries in the appropriate ledger cards.
Sec. 120. Recording of Deliveries of Supplies or Property

in the Books of Accounts. The Chief Accountant shall maintain
Supplies Ledger Cards per stock number; Property, Plant and
Equipment Ledger Cards for each category of assets; and Real
Property Ledger Cards for land.
Upon receipt of the AIR and other supporting documents, the

Chief 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.
Sec. 121. Reporting on Issuance of Supplies/materials.

The General Services Officer or the Local Treasurer, as the case
maybe, shall consolidate weekly the RIS for which supplies and
materials were issued using the Summary of Supplies and Materials
Issued (SSMI). The SSMI together with the original copy of the RIS
shall be submitted to the Chief Accountant, who shall compute cost
of supplies issued and ending inventory using the moving average
method. Based on the SSMI, a JEV shall be prepared to record the
expenditures using appropriate expenditure accounts.
99
Sec. 122. Inventory Process. The following is the general
process to be followed in the control of inventory:

RESPONSIBLE
a. Prepare Purchase Request (PR) for Office of the General

supplies and materials needed for Services Officer
the quarter based on the approved (GSO) or the
annual procurement program, at Municipal Treasurer
the beginning of the year and of as the case maybe.
each subsequent quarters.
b. Prepare ALOBS covering the Office of the GSO or

requisition under the PR. the Municipal
Treasurer or the office
authorized to prepare
the same.
c. Approve ALOBS and the PR. The Budget Officer

and the Chief
Accountant, for the
ALOBS; and the
Local Chief Executive
and the Local
Treasurer, for the PR.
d. Prepare Purchase Order. GSO/Local Treasurer
100
RESPONSIBLE
e. Approve Purchase Order. Local Chief Executive
f. Receive delivered items, prepare GSO/Local Treasurer

Acceptance and Inspection Report
(AIR) and signs acceptance
portion.
g. Inspect items, and signs Property Unit/LGU

inspection portion of the AIR. Inspector
h. Record delivered items in the GSO/Local Treasurer

stock/property cards. Prepare
Disbursement Voucher (DV), sign
box A and forward the same with
the delivery receipt/invoice/
appropriate documents to
Accounting Unit.
i. Record delivered items in Supply Accounting Unit

Ledger Card/Property, Plant and
Equipment Ledger Card/Work,
Other Animals and Breeding
Stocks Ledger Card, on the basis
of the AIR. Process DV and
follow disbursement process.
Prepare JEV. Reconcile JEV with
101
RESPONSIBLE
the entries in the ledger cards
recorded on the basis of the AIR.
j. Prepare Stock Availability Inquiry Requisitioning Unit

(SAI) and forward to Accounting
Unit.
k. Verify records, advise Accounting Unit

requisitioning unit.
l. Prepare Requisition and Issue Slip Requisitioning Unit

(RIS) and forward to Property
/Supply Unit.
m. Release supplies/equipment and GSO/Local Treasurer

record issuance in the stock
cards/property cards.
n. Consolidate RIS for which GSO/Local Treasurer

supplies and materials were
issued and prepare the Summary
of Supplies and Materials Issued
(SSMI) and forward to
Accounting Unit.
o. Prepare JEV on the basis of Accounting Unit

SSMI, and record withdrawals in
102
RESPONSIBLE
Supply Ledger Cards (SLC).
Sec. 123. Receipts of Issuance. All issuances of supplies

or property shall be properly receipted using the forms prescribed
under applicable rules and regulations on supply and property
management in local government units. For transfer of equipment,
the Acknowledgement Receipt for Equipment (ARE) shall however
be used.
Sec. 124. Inventory of Supplies or Property. The local

chief executive shall require periodic physical inventory of supplies
or property. Physical count of inventory items by type shall be
conducted semestrally and reported in the Report of the Physical
Count of Inventories (RPCI). This shall be submitted to the Auditor
concerned not later than July 31 and January 31 of each year for the
first and second 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 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 .
Sec. 126. ProForma Accounting Entries. The following

are the pro-forma accounting entries for supplies or property:
103
Sec. 13 Sec. 15Account Acct.
Sec. 14Particulars Title Code Debit Credit
1. Supplies and Materials

1.1 Spare parts -
Issuance of PR for (enter Obligation in

spare parts
the RAAOMO- P100)
1
Record delivery of 155 00
401 100
items and charge
Spare Parts Inventory
invoice, if Accounts Payable
procurement is on 401 100
credit 410 20
Withholding Taxes
Payable 155 100
Payment of Invoice Cash in Bank LCCA
410 20
Spare Parts Inventory 110 80
Withholding Taxes
Payable
If Procurement is on Cash in Bank LCCA 878 50
Cash 155 50
Motor Vehicles
Maintenance
Spare Parts Inventory
Spare parts worth
P50 used for repairs
of motor vehicles.
1.2 Office Supplies -
Issuance of PR for (Enter obligation in

the RAAOMO-P100)
office supplies P100.
Office Supplies 149 100

Inventory
Record delivery of Accounts Payable 401 100
104
items and charge
invoice, if
procurement is on Withholding Taxes
Payable 410 20
credit. Cash in Bank LCCA 110 80
Payment of Charge Office Supplies

Invoice Inventory 149 100
Withholding Taxes
Payable 410 20
Office Supplies
If procurement is on Expenses 849 100
cash basis Office Supplies
Inventory 149 100
Withdrawal of
Office Supplies for
office use.
1.3 Accountable
Forms -
(Enter obligation in
Issuance of PR for the RAAOMO
P100.00)
accountable forms
Accountable Forms
Inventory 148 100
Withholding Taxes
Payable 410 20
Procurement on a Cash in Bank LCCA 110 80
cash basis
Accountable Forms
Expenses 848 100
Accountable Forms
Inventory 148 100
Withdrawal of office
supplies
2. Equipment
105
2.1 Office Equipment -
Issuance of PR for (Enter obligation in

Office Equipment RAAOCO-P20,000)
-P20,000
Record charge Office Equipment 222 20,000

invoice and Accounts Payable 401 20,000
Delivery of item. 20,00
Payment of Withholding Taxes
delivered Payable 410 2,000
Equipment Cash in Bank LCCA 110 18,000
2.2 Issuance of PR for (Enter Obligation in

Furniture and RAAOCO-P20,000)
Fixture - P20,000
Record Charge Furniture and Fixtures 224 20,000

Invoice and delivery Accounts Payable 401 20,000
of item
Payment of Accounts Payable 401 20,000

delivered furniture Withholding Taxes
and fixture Payable 410 2,000
3. Non-Personal Services
3.1 Security Services -
Issuance of contract (Enter obligation in

for security services the RAAOMO-
- P120,000 P120,000)
Receipt of monthly Security and Janitorial

Billing- P10,000 Services 858 10,000
Accounts Payable 401 10,000
Accounts Payable 401 10,000

Payment of monthly Withholding Taxes
billing Payable 410 1,000
106
3.2 Plumbing Services -
Signing of contract (Enter obligation in

for Plumbing the RAAOMO-
Services P120,000 P120,000)
Receipt of monthly General Services 857 10,000

billing P10,000 Accounts Payable 401 10,000
Payment of Monthly Accounts Payable 401 10,000

Billing Withholding Taxes
Payable 410 1,000
107

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Manual on New Government Accounting System for LGUs

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MANUAL ON THE

NEW GOVERNMENT ACCOUNTING

THE ACCOUNTING POLICIES

Sec. 1 TABLE OF CONTENTS

Sec. 01. Objectives of the Manual 1

Chapter 2. Basic Features and Policies

Sec. 04. Basic Features and Policies 2

Chapter 3. Accounting System

Sec. 2 General Accounting Plan

Sec. 05. General Accounting Plan 8

Sec. 3 Budgetary Accounts

Sec. 06. Budgetary Accounts 8

Sec. 09. Accounting for Obligations 10

Sec. 4 Income/Collections and Deposits

Sec. 13. Separation of Books and Depository Accounts 14

Sec. 37. Disbursements 26

Sec. 6 Miscellaneous Transactions

Sec. 53. Miscellaneous Transactions 41

Sec. 7 Adjusting, Closing and Reversing Entries

Sec. 62. Adjusting Entries 49

Sec. 65. Accruals 50

Chapter 4. Trial Balance, Financial Reports and Statements

Sec. 67. Trial Balance 53

Chapter 5. Special Funds

A. Accounting for Special Education Fund

Sec. 81. Special Education Fund 59

Sec. 88. Separate Registries, Books of Accounts, and

Sec. 94. Definition of Trust Fund 67

Chapter 6. Special Accounts

Sec. 105. Special Accounts in the General Fund 77

Chapter 7. Supplies or Property

Sec. 112. Definition of Supplies or Property 82

1 Status of Appropriations, Allotments and

For Local Government Units

Sec. 01. Objectives of the Manual. The New Government

a. Uniform guidelines and procedures in

Sec. 02. Coverage. This Manual shall be used by all local

Sec. 03. Legal Basis. This Manual is prescribed by the

"The Commission on Audit shall have exclusive

Sec. 04. Basic Features and Policies. The new

a. Accrual Accounting. A modified accrual basis of

b. One Fund Concept. This system adopts the one fund

c. Special Accounts in the General Fund. Special

1. Public utilities and other

d. Chart of Accounts and Account Codes. A new coding

All the above records shall be maintained by the

Cashbook Cash in Treasury

The Treasurers/Collectors shall prepare the Report of

f. Financial Statements. The following statements shall

g. Trial Balance. The two money-column trial balance

h. Appropriations, Allotments and Obligations. Journal

1. Registry of Appropriations, Allotments and

i. Financial Expenses. Financial expenses such as bank

j. Perpetual Inventory of Supplies and Materials.

k. Valuation of Inventory. Cost of ending inventory of

m. Construction of Assets. For assets under construction,

n. Public Infrastructures. Public infrastructures are assets

1. Registry of Public Infrastructure Bridges (RPIB)

During construction these infrastructures shall be

Completed public infrastructures funded out of a

o. Depreciation. The straight-line method of depreciation

p. Reclassification of Obsolete and Unserviceable Assets,

q. Allowance for Doubtful Accounts. An Allowance for