Chapter 1 : Overview of Government Accounting

Encompasses the processes of analyzing, recording, classifying, summarizing and communicating all transactions involving the receipt and disposition of government funds and property, and interpreting the results thereof.

Government Accounting

A process of producing information that is useful in making economic decisions.

Government Accounting

Government accounting places greater emphasis on the ff:

A. Sources and utilization of government funds and

B. Responsibiliy, accountability and liability of entities entrusted with government funds and international bodies.

It include receipts from taxes and other fees, borrowings and grants from other governments and international bodies.

Sources

It includes expenditures on programs, projects, unanticipated losses from calamities and the like.

Utilization

Is directly responsible in implementing this policy and is primarily responsible for government resources entrusted to his agency.

Head of government agency

All those who are exercising authority over a government agency shall share

Fiscal Responsibility

The transfer of government funds from one officer to another shall, except as allowed by law, be made only after the authorization of the

COA

An accountable officer shall immediately notify the COA for any loss of government funds from unforeseen events (force majeure) within

30 Days

Are responsible in implementing this policy, are accountable for the government resources in their custody, and are liable for any loss.

Government officials

Offices that are charged with government accounting responsibility:

COA, DBM, BTr and Government agencies

Has the exclusive authority to promulgate accounting and auditing rules and regulations.

Keeps the general accounts of the government, supporting vouchers, and other documents.

Submits financial reports to the President and Congress

Commision on Audit (COA)

Is responsible for the formulation and implementation of the national budget with the goal of attaining the nation’s socio-economic objectives.

Department of Budget and Management (DBM)

Functions under the Department of Finance and is the cash custodian of the government. It is authorized to:

Receive and keep national funds and manage and control the disbursements thereof and;

Maintain accounts of financial transactions of all national government offices, agencies and instrumentalities.

Bureau of Treasury (BTr)

Refers to any department, bureau or office of the national government, or any of its branches and instrumentalities, or any political subdivision, as well as any government owned or controlled corporation (GOCC), including its subsidiaries, or other self-governing board or commission of the government.

Responsible in directly implementing the projects of, and performing the functions delegated by the government.

Government Agency

Refers to any government agency, department or operating/field unit

Entity

is the process of preparation, presentation and submission of general purpose financial statements and other reports. Its objective is to provide information about the entity that is useful to users for accountability purposes and decision-making

Financial Reporting

Had been used for about 15 decades

“Old” government accounting system

What year it was replaced by the New Government Accounting System

2002

When does the NGAs was replaced by the Government Accounting Manual for National Government Agencies (GAM for NGAs)

January 1, 2016

Was promulgated primarily to harmonize the government accounting standards with international accounting standards, particularly the IPSAS.

The GAM for NGAs

Legal Basis: The GAM for NGAs is promulgated by the COA based on the authority conferred to it by the

Philippine Constitution

Basic Accounting and Budget Reporting Principles

1. Compliance with PPSAS and other relevant laws

2. Accrual Basis

3. Budget Basis

4. Revised Chart of Accounts prescribed by COA

5. Double entry

6. Financial statements based on accounting and budgetary records

7. Fund Cluster Accounting

Code 01

Regular Agency Fund

Code 02

Foreign Assisted Projects Fund

Code 03

Special Account-Locally Funded/Domestic Grants Fund

Code 04

Special Account-Foreign Assisted/Foreign Grants Fund

Code 05

Internally Generated Funds

Code 06

Business Related Funds

Code 07

Trust Receipts

are the attributes that make information useful to users

Qualitative Characteristics

The information is blank when users can reasonably be expected to comprehend its meaning. Users are assumed to have

reasonable knowledge of the entity’s activities and willingness to study the information.

Understandability

If it can assist users in evaluating past, present or future events in confirming or correcting past evaluations. In order to be blank information must also be timely.

Relevance

Affects the relevance of information. Information is blank if its omission or misstatement could influence the decision of users. It depends on the nature or size of the item or error.

Materiality

Information losses its relevance if there is no undue delay in its reporting. The complexity of an entity’s operations is not sufficient reason for failing to report on a timely basis.

Timeliness

it is free from material errors and bias, can be depended on by users to represent faithfully that which it purports to represent or could reasonably be expected to represent.

Reliability

It should be presented in accordance with the substance of the transactions and other events, and not merely on their legal form.

Faithfully Representation

If information is to represent faithfully the transactions and other events that it purports to represent, it is necessary that they be accounted for and presented in accordance with their substance and economic reality, and not merely their legal form.

Substance over form

Information is blank if it is free from bias

Neutrality

is the degree of caution, when making estimated under conditions of certainty, such that assets or revenue are not overstated and liabilities or expenses are not understated.

Prudence

Information should be blank within the bounds of materiality and cost.

Completeness

It is when the users are able to identify the similarities and differences between that information and information in other reports. It applies to comparison of FS of different entities and comparison of FS of the same entity over different periods.

Comparability

Are those intended to meet the needs of users who are not in a position to demand reports tailored to meet their particular information needs.

General Purpose Financial Statements

Complete Set of General Purpose Financial Statements consist of:

1. Statement of Financial Position

2. Statement of Comprehensive Income

3. Statement of Changes in Net Assets/Equity

4. Statement of Cash Flows

5. Statement of Comparison of Budget and Actual amounts

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

are resources controlled by the entity as a result of past events, and form which future economic benefits or service potential are expected cash flow to the entity

Assets

Key Features of an asset:

A. The benefits must be controlled by the entity.

B. The entity must have arisen from a past event and;

C. Future economic benefits or service potential must be expected to flow to the entity.

means the ability to benefit from an asset or prevent others from benefitting from that asset

Control

It normally evidences control.

Possession or ownership

means the ability to use, exchange, lease, sell, or use the asset to settle liabilities, or distribute it to owners.

Benefit

A transaction or an event giving rise to control of future economic benefits must have occured.

Past event

Recognition of an asset:

1. It is probable that the future economic benefits will flow to the entity and;

2. The asset has a cost or value (fair value) that can be measured reliably

are present obligations of the entity arising from the past events, the settlement of which is expected to result in an outflow from the entity of resources embodying the economic benefits or service potential

Liabilities

Is the residual interest in the assets of the entity after deducting all its liabilities

Net assets/Equity

Is the gross inflow of economic benefits or service potential during the reporting period when those inflows result in an increase in net assets/equity, other than increases relating to contributions from owners.

Revenue

are future economic benefits that have been contributed to the entity by external parties which do not result to liabilities of the entity and for which the contributor obtains interest in the net assets of the entity. right to dividends and right to assets in cases of liquidation.

Contributions from owners

Comprise all funds derived from the income of any agency of the government and available for appropriation or expenditure in accordance with the law

Revenue Funds

Are decreases in economic benefits or service potential during the reporting period in the form of outflows or consumption of assets or incurrence of liabilities that result in decreases in net assets/equity, other than those relating to distribution to owners.

Expenses

are future economic benefits distributed by the entity to its owners, either as a return on instrument or as a return of investment

Distributions to owners

It provides the principles and procedures to be applied in the financial reporting of government entities. It was promulgated by the COA primarily to harmonize the government accounting standards with international standards.

GAM for NGAs

What P.D. no? The head of the government agency is directly responsible in implementing that government resources must be utilized efficiently and effectively in accordance with the law.

P.D. No. 1445

It is improved when information is reported on a timely basis.

Relevance

The best estimate for a loss is 100,000. However, the entity deliberately overstated the loss to 200,000. What qualitative characteristic is violated?

Reliability

Which of the following FS is peculiar to a government entity?

Statement of Comparison of Budget and Actual Amounts

An entity recognizes an estimate loss from the decline in value of a property. which of the ff is most likely the qualitative characteristic being applied by the entity?

Prudence

What qualitative characteristic does an entity most likely would need to make some trade-offs?

Relevance and Reliability