LGU-NGAS Volume1

MANUAL ON THE
NEW GOVERNMENT ACCOUNTING

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

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

Sec. 05. General Accounting Plan
Sec. 3 Budgetary Accounts

Sec. 06. Budgetary Accounts
Sec. 07. Accounting for Appropriations
Sec. 08. Accounting for Allotments
iii
8
8
10
Page
Sec. 09. Accounting for Obligations
Sec. 10. Adjustment of Obligations
Sec. 11. Accounting Procedures for
Budgetary Accounts
Sec. 12. Terminology and Classification
10
11
11
12
Sec. 4 Income/Collections and Deposits

Sec. 13. Separation of Books and Depository Accounts
Sec. 14. Depository Accounts
Sec. 15. Remittance of Government Monies to the
Local Treasury
Sec. 16. Sources of Income of LGUs
Sec. 17. General Income Accounts
Sec. 18. Specific Income Accounts
Sec. 19. Methods of Accounting for Income
Sec. 20. Basis of Recording Real Property Tax/
Special Education Tax
Sec. 21. Delinquencies for Real Property Tax/
Special Education Tax Prior to CY 2002
Sec. 22. Discount on Real Property Tax/
Sec. 23. Fines and Penalties
Sec. 24. Other Receipts
Sec. 25. Borrowings
Sec. 26. Sale of Property, Plant and Equipment
Sec. 27. Refund of Cash Advances
Sec. 28. Receipt of Performance Bonds
Sec. 29. Reporting for Collections and Deposits
Sec. 30. Verification of Collections and
Accountable Forms
Sec. 31. Designation of Liquidating Officers
Sec. 32. Deposit of Collections
Sec. 33. Deposit of Field Collections
Sec. 34. Accounting for Collections and Deposits
Sec. 35. Receipts and Collection Process
Sec. 36. Pro-forma Accounting Entries
iv
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15
15
15
17
16
16
16
17
17
18
18
18
18
18
18
19
19
19
20
20
21
21
22
Page
Sec. 5 Disbursements
Sec. 37.
Sec. 38.
Sec. 39.
Sec. 40.
Sec. 41.
Sec. 42.
Sec. 43.
Sec. 44.
Sec. 45.
Sec. 46.
Sec. 47.
Sec. 48.
Sec. 49.
Sec. 50.
Sec. 51.
Sec. 52.
Disbursements
Certification on Disbursements
Approval of Disbursements
Payments by Check
Recording Check Disbursements in the
Cashbooks
Release of Checks
Reporting of Checks Issued
Check Disbursement Process
Payments in Cash
Reporting of Cash Disbursements
Cash Advances for Travel
Payments out of the Petty Cash Fund
Cash Disbursement Process
Purchase or Construction of Property,
Plant and Equipment
Purchase of Supplies
Pro-forma Accounting Entries
26
26
27
27
27
27
27
28
29
30
30
30
31
33
34
34
Sec. 6 Miscellaneous Transactions

Sec. 53.
Sec. 54.
Sec. 55.
Sec. 56.
Sec. 57.
Sec. 58.
Sec. 59.
Sec. 60.
Sec. 61.
Miscellaneous Transactions
Loss of Cash and Property
Grant of Relief from Accountability
Cash Overage
Dishonored Checks
Cancellation of Lost Check Issued
Spoiled and Stale Checks
Suspensions, Disallowances and Charges
41
41
42
42
42
43
43
44
45
Sec. 7 Adjusting, Closing and Reversing Entries

Sec. 62. Adjusting Entries
Sec. 63. Types of Adjusting Entries
Sec. 64. Prepayments
4v
49
49
49
Page
Sec. 65. Accruals
Sec. 66. Closing Journal Entries
50
51
Chapter 4. Trial Balance, Financial Reports and Statements

Sec. 67. Trial Balance
Sec. 68. Purpose of the Trial Balance
Sec. 69. Procedures in the Preparation of the
Trial Balance
Sec. 70. Pre-Closing Trial Balance
Sec. 71. Status of Appropriations, Allotments and
Obligations
Sec. 72. Post Closing Trial Balance
Sec. 73. Interim Reports
Sec. 74. Worksheet
Sec. 75. Statement of Management Responsibility for
Financial Statements
Sec. 76. Year-End Financial Statements
Sec. 77. Balance Sheet
Sec. 78. Statement of Income and Expenses
Sec. 79. Statement of Cash Flows
Sec. 80. Notes to the Financial Statements
53
53
53
53
54
54
55
55
56
56
56
56
57
57
Chapter 5. Special Funds

A. Accounting for Special Education Fund
Sec. 81. Special Education Fund
Sec. 82. Application of Proceeds of the Additional
One Percent (1%) Special Education
Fund Tax
Sec. 83. Special Education Fund Budget
Sec. 84. Basis of Recording Special Education Tax
Sec. 85. Delinquencies for Special Education Tax
prior to CY 2002
Sec. 86. Collection Procedures for the Special
Education Tax
Sec. 87. Separate Cashbooks for Special Education
Fund
vi
5
59
59
59
60
60
60
61
Page
Sec. 88. Separate Registries, Books of Accounts, and
Financial Reports for Special Education
Fund
Sec. 89. Preparation and Control of ALOBS for
Special Education Fund
Sec. 90. Certification as to Cash Availability
Sec. 91. Disbursement Procedures
Sec. 92. Inventory Process
61
61
62
62
62
62
B. Trust Fund
Sec. 94.
Sec. 95.
Sec. 96.
Sec. 97.
Sec. 98.
Sec. 99.
Definition of Trust Fund

Receipts Accruing to the Trust Fund
Collection Procedures for the Trust Fund
Project Expenditures
Separate Cashbooks for Trust Fund
Separate Books of Accounts and Financial
Reports for Trust Fund
Sec. 100. Disbursements within Trust Agreement/
Approved Budget
Sec. 101. Certification and Approval of Disbursements
from Trust Funds
Sec. 102. Disbursement Process
Sec. 103. Inventory Process
Sec. 104. Pro-forma Accounting Entries for
Trust Funds
67
67
67
68
68
68
68
68
69
70
71
Chapter 6. Special Accounts

Sec. 105. Special Accounts in the General Fund
Sec. 106. Objectives for the Maintenance of
Special Accounts
Sec. 107. Special Accounts Subsidiary Ledger
Sec. 108. Sub-codes for the Special Accounts
Sec. 109. Profit from Operation
Sec. 110. Reporting
vii
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77
77
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77
78
78
79
Page
Chapter 7. Supplies or Property
Sec. 112.
Sec. 113.
Sec. 114.
Sec. 115.
Sec. 116.
Sec. 117.
Sec. 118.
Sec. 119.
Sec. 120.
Sec. 121.
Sec. 122.
Sec. 123.
Sec. 124.
Sec. 125.
Sec. 126.
Definition of Supplies or Property

Classification of Supplies or Property
Perpetual Inventory Method
Moving Average Method
Requisition Procedures
Issuance of Purchase Orders or Contract
Acceptance and Inspection of Purchases
Property Records to be Maintained
Recording of Deliveries of Supplies or
Property in the Books of Accounts
Reporting on Issuance of Supplies/materials
Inventory Process
Receipts of Issuance
Inventory of Supplies or Property
Disposal of Supplies of Property
82
82
83
83
84
85
85
86
86
86
86
89
89
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90
ANNEXES
Annex No.
1
2
3
4
5
6
7
8
Status of Appropriations, Allotments and

Obligation
Statement of Management Responsibility
for Financial Statements
Balance Sheet
Statement of Income and Expenses
Statement of Cash Flows
Notes to the Financial Statements
Table of Estimated Useful Lives
Summary of Public Infrastructures
viii
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99
100
101
102
103
107
113
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)
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.
e. Books of Accounts.
follows:
The Books of Accounts are as
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.
be prepared:
The following statements shall
Balance Sheet
Statement of Income and Expenses
Statement of Cash Flows
10
Notes to Financial Statements shall accompany

the above statements.
g. Trial Balance.
shall be used.
The two money-column trial balance
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.
11
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.
12
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.
13
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.
14
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
appropriate RAAOs the approved
appropriation
per
Appropriation
Ordinance.
Office of the
Accountant
b.
Forwards the advice

of allotments to the Office of the
Office of the Budget

Officer
18
PROCESS
PERSON / UNIT
RESPONSIBLE
Accountant and returns the work plan

to the concerned departments/ offices.
c.
Enters the allotments

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

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

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.
Chief Accountant
g.
Records
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.
Adjust
accordingly the amount of recorded
obligations in the RAAOs.
Office of the
Accountant
h.
At the end of each

month,
reconcile
records
on
allotments available for obligation.
Budget Officer and

Chief Accountant
19
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, parttime 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
underwriting fees, guarantee fees)
Loan Amortization
21
(e.g.
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.
b.
c.
d.
e.
f.
g.
Subsidy from Other LGUs

Subsidy from Other Funds
Subsidy from Special Accounts
Sales Revenue
Dividend Income
Interest Income
Gain on Sale of Securities
22
h.
i.
j.
k.
Gain on Sale of Assets

Sale of Confiscated Goods and Properties
Foreign Exchange (FOREX) Gains
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.
2.
3.
4.
Property Taxes
Taxes on Goods and Services
Other Taxes
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.
b.
c.
d.
Borrowings
Sale of Property, Plant and Equipment
Refund of Cash Advances
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:
PROCESS
PERSON / UNIT
RESPONSIBLE
a.
Receive
payment
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.
Collector/Teller
b.
Check remittances
and verifies accountable forms of
collectors/tellers.
Consolidates
collections and remits to the
Treasurer/Cashier. Prepares RCD.
Liquidating
Officer
28
PROCESS
PERSON / UNIT
RESPONSIBLE
c.
Receive
remitted
collections, consolidates the same
and prepares RCD. Records in the
Cashbook Cash in Treasury.
Treasurer
d.
Deposit collections
in the appropriate bank account per
authorized depository bank. Records
deposit in the Cashbook Cash in
Bank.
Treasurer
e.
Forward RCD to
Accounting Unit with copies of ORs
and validated deposit slips.
Treasurer
f.
Prepare Journal of
Entry Voucher and record in the Cash
Receipt Journal.
Accountant
Sec. 13Sec. 36. Proforma Accounting Entries. The

following are pro-forma accounting entries for income, collection
and deposit:
Particulars
Account Title
Acct.
Code
Debit
124
1,000
Credit
INCOME
1. Real Property Tax Basic
A. Books of the
Municipality
a. Setting-up of RPT
Receivable
RPT = P1,000
RPT Sharing:
Municipal - 40%
Province - 35%
Barangay - 25%
Real Property Tax

Receivable
Deferred Real
Property Tax Income
b. Receipt of
Payment
Cash in Treasury
Real Property Tax
Receivable
29
448
101
124
1,000
100
100
Account Title
Acct.
Code
c. Distribution of
Collection
RPT Sharing:
Municipal - 40%
Province - 35%
Barangay - 25%
Deferred Real Property

Tax Income
Real Property Tax
Due to LGUs
448
711
431
100
d. Deposit of Collections
Cash in Bank LCCA

Cash in Treasury
110
101
100
e. Remittance of Share
(Province)
Due to LGUs
Cash in Bank LCCA
431
110
35
f. Remittance of Share
(Barangay)
Due to LGUs
Cash in Bank LCCA
431
110
25
a. Upon receipt of the

Summary of the JEV
from the Municipal
Accountant
Due from LGUs

Real Property Tax
131
711
35
b. Upon receipt of share
Cash in Bank LCCA

Due from LGUs
110
131
35
Cash in Treasury
Receipts from Markets
Garbage Fees
101
783
772
100
Cash in Bank LCCA

Cash in Treasury
110
101
100
110
1,000
Particulars
B.
Debit
Credit
40
60
100
35
25
Books of the
Province
35
35
2. Operating and Service Income

a. Receipt of Income
b. Deposit of Collections
90
10
100
3. Share from Internal Revenue Collections

a. Receipt of Notice of
Funding Check Issued
from the DBM and
credit memo from
the bank for Share
from Internal Revenue
Collections
Cash in Bank LCCA

Share from Internal
Revenue Collections
30
746
1,000
Particulars
b. Receipt of Notice of
Funding Check Issued
from the DBM for
Share from Internal
Revenue Collections
Account Title
Due from NGAs
Share from Internal
Revenue Collections
Acct.
Code
130
Debit
1,000
746
Credit
1,000
4. Grants and Donations

a. Receipt of grants and
donations in cash
(Donations in kind
shall be booked-up
using the appropriate
asset account)
Cash in Treasury
Income from Grants
and Donations
101
100
b. Receipt of grants and

donations in kind Motor Vehicle:
Original Cost P1,000
Less: Acc. Depn. 200
Book Value
P 800
Motor Vehicles
Invested Equity
218
537
800
(At the end of Year)

Invested Equity
Government Equity
537
501
800
110
1,000
403
951
952
110
10
12
101
1,000
403
952
110
651
100
800
800
5. BORROWINGS
a. Receipt of borrowed
funds from bank Principal - P1,000
Bank Charges - 10
Interest Expense- 12
Cash in Bank LCCA

Loans Payable
Current, Domestic
Bank Charges
Interest Expenses
Cash in Bank LCCA
b. Receipt of borrowed
funds from other
agency Principal P1,000
Interest Expense - 6
Cash in Treasury
Loans Payable
Current, domestic
Interest Expenses
Cash in Bank LCCA
c. Payment of loan
amortization
Loans Payable
Current, Domestic
Cash in Bank - LCCA
403
110
1,000
22
1,000
6
200
6. SUBSIDIES
a. Subsidy from Other Funds (General Fund to Special Education Fund)
GENERAL FUND BOOKS
31
200
Particulars
Transfer of subsidy
to Special Education
Fund (Aid to SEF to
finance its projects)
Account Title
Subsidy to Other Funds
Cash in Bank LCCA
Acct.
Code
897
110
Debit
500
Credit
500
SPECIAL EDUCATION FUND BOOKS

Receipt of subsidy funds
from Other funds
Cash in Treasury
Subsidy from Other
Funds
101
500
605
500
b. Special Accounts (subsidy from General Fund proper to Operation of Public

Market)
BOOKS OF GENERAL FUND PROPER
Transfer of subsidy to
Special Account
Subsidy to Special
Accounts
Cash in Bank LCCA
898
110
500
500
BOOKS OF SPECIAL ACCOUNT (OPERATION OF PUBLIC MARKET)

Receipt of subsidy from
General Fund Proper
Cash in Bank LCCA

Subsidy from Special
Accounts
110
500
606
500
7. REFUND OF CASH ADVANCES

a. Cash Advance by an Officer for Local Travel
a. To take up the cash
advance
b. To take up refund of
cash advance
Due from Officers &

Employees
Cash in Bank LCCA
Cash in Treasury
Due from Officers &
Employees
128
110
10
101
10
10
128
10
b. Cash Advance by a Disbursing Officer for Salaries and Wages

a. To take up the cash
advance
Cash Disbursing
Officers
32
107
10
Particulars
Account Title
Cash in Bank LCCA
b. To take up refund of
cash advance
Cash in Treasury
Cash Disbursing
Officers
Acct.
Code
110
101
Debit
Credit
10
10
107
10
8. RECEIPT OF CASH BONDS

a. To take up receipt of
performance bond in
cash
Cash in Treasury
Performance/ Bidders/
Bail Bonds Payable
101
50
b. To take up deposit of
performance bond
Cash in Bank LCCA

Cash in Treasury
110
101
50
c. To take up refund of
performance bond
Performance/ Bidders/
Bail Bonds Payable
Cash in Bank LCCA
414
110
50
414
50
50
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.
2.
3.
4.
Personal Services
Maintenance and Other Operating Expenses
Capital Outlay
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:
PROCESS
PERSON / UNIT
RESPONSIBLE
a.
Gather supporting
documents, and approved ALOBS,
prepare DV and forward to Head of
Department.
Concerned Office
b.
Sign Box A of DV
and submit to the Accounting Unit.
Supervisor/Head
of Department
c.
Check
completeness of documents, assign
number to DV, sign Box B and
forward to Treasurer.
Accounting Unit
d.
Verify
claim,
certify cash availability (Box C) and
forward to approving officer.
Treasurer
Note: If funds are not available, return

to Accountant for recording in the
35
PROCESS
PERSON / UNIT
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
transaction (Box D) and forward
DV to Cashier.
Local Chief
Executive or
authorized
approving officer
f.
Prepare, sign check

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

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.
Treasurer
j.
Prepare the JEV

based on individual checks/voucher;
sign Prepared By
portion
Accounting Unit
36
PROCESS
PERSON / UNIT
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,

supporting documents and JEV to
the Office of the Auditor.
Accountant
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:
PROCESS
PERSON / UNIT
RESPONSIBLE
38
PROCESS
a. Processing of Payrolls to be paid by
cash is the same as that of steps (a)
to (e) for check disbursements.
PERSON / UNIT
RESPONSIBLE
Concerned
offices
a. Gather duly certified and approved

payrolls to be paid out of cash
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.
Office of the
Treasurer
b. Check completeness of documents/

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

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

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

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

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

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

Treasurer/ Cashier. An official
Disbursing
Officer
39
PROCESS
PERSON / UNIT
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,

attach paid payrolls/ supporting
documents and copy of OR for
unused cash advance returned to
Treasurer/Cashier. Sign "Certified
Correct portion of Report of
Disbursement and submit to
Accounting Unit.
Disbursing
Officer
j.
Prepare JEV to record the

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

and
supporting
documents
including JEV to the Office of the
Auditor.
Accountant
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:
Particulars
Account Title
1. Payment through Cash Advances
41
Acct.
Code
Debit
Credit
Particulars
Account Title
Acct.
Code
Debit
Credit
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
for payroll
2. Liquidation of cash
advance for payroll
Cash Disbursing
Officers
Cash in Bank LCCA
Salaries and Wages
Regular Pay
PERA
Additional
Compensation
Withholding Taxes
Payable
GSIS Payable
PAG-IBIG Payable
Cash Disbursing
Officers
107
110
21,000
801
804
18,000
3,000
805
5,000
21,000
410
411
412
2,000
1,500
1,500
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
insurance and PAGIBIG Contributions
Life and Retirement

Insurance
Contributions
PAG-IBIG
Contributions
GSIS Payable
PAG-IBIG Payable
817
1,500
818
411
412
1,500
1,500
1,500
b. Petty Cash Fund

For establishment of fund, Enter obligation in RAAOMO as Other Expenses for
P6,000
1. Release of cash
advance for petty
cash fund
miscellaneous
expenses
Petty Cash Fund

Cash in Bank LCCA
42
105
110
6,000
6,000
Particulars
Account Title
Acct.
Code
Debit
Credit
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
petty cash fund
during the year
Traveling Expenses
Local
Office Supplies
Expenses
Office Equipment
Maintenance
Other Expenses
Cash in Bank LCCA
831
500
849
2,500
882
950
110
1,000
800
4,800
Enter obligation in RAAOMO for Office Supplies P4,000 and Traveling

Expenses of P1,000.
3. Liquidation at year
end
Traveling Expenses
Local
Office Supplies
Expenses
Petty Cash Fund
831
1,000
849
105
4,000
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
Petty Cash Fund.
Cash in Treasury
Petty Cash Fund
101
105
1,000
128
110
1,000
831
900
1,000
c. Cash advance for travel

Enter obligation in RAAOMO for Travel of P1,000
advance during the
current year
(assuming only P900
was utilized and P100
was refunded)
Due from Officers and

Employees
Cash in Bank LCCA
Traveling Expenses
Local
Employees
Adjust RAAOMO for refund of cash advance of P100
43
128
1,000
900
Particulars
3. For amount refunded
where official receipt
was issued
Account Title
Cash in Bank LCCA
Employees
Acct.
Code
Debit
110
Credit
100
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
Cash in Bank LCCA
841
110
3,000
3,000
Enter obligation in RAAOMO for electricity of P1,500 and

telephone/internet of P2,000
2. Payment of utilities
(MERALCO and
PLDT)
Electricity
Telephone/Telegraph
and Internet
Cash in Bank LCCA
835
1,500
837
110
2,000
3,500
Enter obligation in RAAOMO for training and seminar expenses of P1,000

3. Payment of seminar
fee
Training and Seminar

Expenses
Cash in Bank LCCA
833
110
1,000
1,000
b. Financial Expenses
Sec. 11 Enter obligation in RAAOFE for bank charges of P300

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

2. Interest Expense
Interest Expenses
Cash in Bank LCCA
44
952
110
400
400
Particulars
Account Title
Acct.
Code
Debit
Credit
c. Office Equipment Enter obligation in RAAOCO for P6,000 for purchase of

equipment
1. Issuance of PO to
dealer
2. Receipt of office
equipment
No entry
Office Equipment
Cash in Bank LCCA
222
110
6,000
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
Cash in Bank LCCA
110
360,000
2. Payment of second
billing 100%
accomplishment
3. Remittance of taxes
withheld
Construction in
Progress Roads,
Highways and
Bridges
Withholding Taxes
Payable
Cash in Bank LCCA
Withholding Taxes
Payable
Cash in Bank LCCA
232
400,000
410
110
40,000
360,000
410
110
80,000
Public Infrastructure
Construction in
Progress Roads,
Highways and
Bridges
243
800,000
Government Equity
Public Infrastructures
501
243
80,000
Sec. 13If funded from regular agency income

4. To take up roads
completed
5. To transfer completed
roads to Registry of
Public Infra- structures
at the end of the year
45
232
800,000
800,000
800,000
Particulars
Account Title
Acct.
Code
Debit
Credit
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
roads
At year end,upon full

payment of laon
Sec. 15e.
Construction in
Progress Roads,
Highways and
Bridges
243
Government Equity
501
243
800,000
232
800,000
800,000
800,000
General Repair/Construction of Building by Administration
1. Approval of the
project P1M
No entry
Enter obligation in RAAOCO for P600,000 for construction materials

2. Issue PO for building
materials: Lumber,
nails, cement, sand
and gravel, paints,
etc. = P600,000
3. Payment for
construction materials
received
4. Issuance of materials
P590,000
No Entry
Construction Materials
Inventory
Withholding Taxes
Payable
Cash in Bank LCCA
Construction in
Progress Agency
Assets
Construction Materials
Inventory
156
410
110
230
156
Sec. 13 Enter obligation in RAAOCO for P380,000 for labor

5. Cash advance granted
Cash Disbursing
46
600,000
60,000
540,000
590,000
590,000
Particulars
to Disbursing Officer
for payroll
Account Title
Officers
Cash in Bank LCCA
6. Liquidation by
Disbursing Officer of
paid payroll
Construction in
Progress Agency
Assets
Withholding Taxes
Payable
Cash Disbursing
Officers
7. Remittance of
withholding tax
8. Accomplishment
Report approved by
the LCE
Acct.
Code
107
110
230
Debit
350,000
Credit
350,000
380,000
410
30,000
107
350,000
Withholding Taxes
Payable
Cash in Bank LCCA
410
Buildings
Construction in
Progress Agency
Assets
204
30,000
110
30,000
970,000
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 purchased
2. Remittance of
withholding tax
Sec. 13g.
Land
Withholding Taxes
Payable
Cash in Bank LCCA
Withholding taxes
Payable
Cash in Bank LCCA
201
2M
410
110
410
110
200,000
1.8M
200,000
200,000
Land and Building
Enter obligation in RAAOCO for P600,000 for land and P400,000 for
building
1. Payment of the land
and building
(assessed value of
land is P600,000) for
P1,000,000
Land
Building
Withholding Taxes
Payable
Cash in Bank LCCA
47
201
204
410
110
600,000
400,000
100,000
900,000
Particulars
2. Remittance of
withholding tax
Account Title
Acct.
Code
Withholding Taxes
Payable
Cash in Bank LCCA
410
110
Debit
Credit
100,000
100,000
h. Purchase of Inventories
Enter obligation in RAAOMO for purchase of P2,500 worth of spare arts
1. Payment of delivered
spare parts
Spare Parts Inventory

Withholding Taxes
Payable
Cash in Bank LCCA
155
2,500
410
110
250
2,250
i. Enter obligation in RAAOMO for purchase of office supplies

1. Payment of office
supplies delivered
Office Supplies
Inventory
Withholding Taxes
Payable
Cash in Bank LCCA
149
3,000
410
110
300
2,700
j. Fund Transfers
Sec. 15 Enter obligation in RAAOMO for subsidy to LGU XYZ

1. Cash assistance to
LGU XYZ
Subsidy to Local
Government Units
Cash in Bank LCCA
895
110
30,000
30,000
Sec. 16 k. Enter obligation in RAAOMO for subsidy to SEF

1. Cash transfer to SEF
as subsidy
Subsidy to Other
Funds
Cash in Bank LCCA
897
110
10,000
10,000
Sec. 13
l. Enter obligation in RAAOMO for grants and donation to Trust Fund
1. Cash transfer to Trust
Fund as counterpart
LGU funds.
Grants and Donations

Cash in Bank LCCA
48
889
110
500,000
500,000
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.
2.
3.
4.
Loss of Cash and Property Accountability

Cash Overage
Dishonored Check
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:
Particulars
Account Title
Acct.
Code
Debit
Credit
1. Cash Shortage
a. Cash shortage of the of the Disbursing Officer
To take up cash
shortage

Employees
Cash Disbursing
Officers
128
50
107
50
b. Cash Shortage of the Treasurer

To take up cash
shortage

Employees
Cash in Treasury
128
101
50
50
2. Grant of Relief from Accountability for Loss of Government Funds

To record the loss of
fund by a Disbursing
Officer (allegedly thru
theft ) = P50

Employees
Cash Disbursing
Officers
To take up relief from

accountability
Loss of Assets (current

year) or Prior
Years adjustments
(prior years)
Employees
128
50
107
948
50
50
128
50
3. Cash Settlement in case of denial of Request for Relief from

Accountability
To take up
payment/settlement
Cash in Treasury
Employees
4. Cash Overage
53
101
128
50
50
Particulars
To take up cash
overage discovered
during cash
examination
Account Title
Cash in Treasury
Other Specific Income
of LGU
Acct.
Code
101
Debit
50
792
Credit
50
5. Dishonored Checks
From payment of real property tax in the current year or prior year
Upon receipt of advice
of dishonored check
and cancellation of
Official Receipt
Receipt of
refund/settlement
Real Property Tax

Receivable
Deferred Real
Property Tax
Income
124
50
448
50
Due to LGUs
Real Property Tax
Income
Cash in Bank LCCA
431
30
711
110
20
Cash in Treasury
Real Property Tax
Receivable
101
50
50
124
50
6. Lost/Destroyed/Stale/Obsolete Checks
Check issued in the current/prior year for replacement
Check cancellation
Replacement
Cash in Bank LCCA

Accounts Payable
110
401
50
Accounts Payable
Cash in Bank LCCA
401
110
50
50
50
7. Disallowances and Charges

a. Recording of disallowance for current years transaction
When the disallowance
becomes final and
executory
Overpayment of Office
Supplies
Amount paid - P100
Should be
- 90
Receivables
Disallowances/
Charges
Office Supplies
Expense
54
138
849
10
10
Particulars
Difference
-
Account Title
Acct.
Code
Debit
Credit
10
Settlement of
Disallowance
Cash in Treasury
Receivables
Disallowances/
Charges
101
10
138
10
b. Recording of disallowance for prior years transaction

When the disallowance
becomes final and
executory
Settlement of
disallowance
Receivables
Disallowances/
Charges
Prior Years
Adjustments
Cash in Treasury
Receivables
Disallowances/
Charges
138
10
533
101
10
10
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
executory
Underpayment of
Franchise Tax
Amount Paid - P 100
Should be
- 110
Charge
- 10
Settlement
Receivables
Disallowances/
Charges
Franchise Tax
Cash in Treasury
Receivables
Disallowances/
Charges
138
724
10
101
10
10
138
10
c.2 Recording of charges which collection were made in the prior year
When the charge
becomes final and
executory
Receivables
Disallowances/
Charges
55
138
10
Particulars
Settlement
Account Title
Prior Years
Adjustments
Cash in Treasury
Receivables
Disallowances/
Charges
Acct.
Code
Debit
533
101
Credit
10
10
138
10
8. Refund of Overpayment
a. Overpayment taken up as receivable
To record overpayment
of salaries and wages
(When overpayment is
ascertained)

Employees
Salaries and Wages
Regular Pay
To record refund of
overpayment
Cash in Treasury
Employees
128
10
801
101
10
10
128
10
b. Refund of overpayment not taken up as receivable

Refund of
overpayment of
Salaries and Wages
Regular Pay during the
current year
Cash in Treasury
Salaries and Wages
Regular Pay
101
To take up refund of
over payment in the
ensuing year
Cash in Treasury
Prior Years
Adjustments
101
10
801
533
10
10
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.
Particulars
1.
Report of supplies
utilized for P2,000.
Account Title
Office Supplies
Expense
Code
849
Debit
Credit
2,000
Office Supplies
Inventory
149
2.
Application
of advance RPT for
P2,500.
Deferred Credits to
Income
Real Property Tax
440
2,000
2,500
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.
Particulars
1.
Receipt of the
Account Title
Due from NGAs
58
Code
Debit
130
20,000
Credit
Acct.
Particulars
Notice of Funding
Check Issued for
the December
Share from
Internal Revenue
Collections for
P20,000.
2. Unpaid salaries and

wages of employees,
at end of accounting
period, P50,000.
Account Title
Code
Debit
Credit
Share from Internal

Revenue Collections
Salaries and Wages

Regular Pay
746
801
20,000
50,000
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

accounts and debit the total to the
Equity account.
6.
Credit all debit balances of the
accounts and credit the total to the
Equity account.
intermediate
Government
intermediate
Government

Acct.
Particulars
1. To close the Revenue

accounts to the
Income and Expense
Summary account.
Account Title
Real Property Tax
Code
Debit
711
100
746
10,000
Registration Fees
723
50
Income and Expense
761
20
Share from Internal

Revenue Collections
Credit
Business Taxes &

Licenses
Summary
532
2.
3.
To close the
Income and
Expense Summary
to Retained
Operating Surplus
account.
Income and Expense
To close the
Retained Operating
Surplus to
Government Equity
account.
Retained Operating
Surplus
Summary
Retained Operating
Surplus
Government Equity
60
532
10,170
5,670
534
534
501
5,670
5,670
5,670
Acct.
Particulars
Account Title
Code
Debit
Credit
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.
b.
c.
To prove the mathematical equality of the debits

and credits after posting;
To uncover errors in journalizing and posting; and
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.
b.
c.
List the account titles and their debit/credit

balances based on the accounts and amount
reflected in the general ledger;
Total the debit and credit columns; and
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/
Project/ Activity
Appropriations
Allotment
Obligation
Unobligated
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
COA Regional Office
COA Unit Auditor
Local Chief Executive
Local Sanggunian
Local Treasurer
Local Accountant
1 copy
1 copy
1 copy
1 copy
1 copy
1 copy
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_____
Accounts
Title
Code
Trial
Balance
Dr.
Cr.
Adjustments
Adjusted
T/B
Dr.
Cr.
Dr.
Cr.
Statement
of Income
&
Expenses
Dr.
Cr.
Balance
Sheet
Dr.
1. Account title and code columns show the account

titles/codes of the general ledger accounts.
64
Cr.
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
principleschanges 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)
Particulars
Account Title
1. Set-up Special
education Tax
Receivable
Total Receivables
P500,000
Provincial Share
P250,000

Receivable
Deferred Special
Education Tax
Income
2. Collection of Special
Education Tax
P200,000.
Cash in Treasury
Special Education
Tax Receivable
72
Acct.
Code
Debit
125
500,000
449
101
125
Credit
500,000
200,000
200,000
Particulars
Computation of Shares
of LGUs in RPT
50% of
P200,000 for
Provincial
Share
3. Deposit of collections
with authorized
depository bank
Account Title
Deferred Special
Education Tax
Income
Due to LGUs
Cash in Bank
Acct.
Code
449
Debit
Credit
200,000
713
431
100,000
100,000
110
101
200,000
431
100,000
200,000
LCCA
Cash in Treasury
4. Remittance of share to
Province ( Special
Education Tax)
P100,000
Due to LGUs
(Province)
Cash in Bank LCCA
5. Receipt of allotment for

Allotment Class:
Personal Services P50,000
MOOE
20,000
Capital Outlay
30,000
Total P100,000
Memo entry in
Registry of
Appropriations ,
Allotments and
Obligations (Personal
Services (RAAOPS,
MOOE RAAOMO,
Capital Outlay
RAAOCO)
6. Obligation for PS
Salaries of teachers for
extension class
P30,000
Memo entry in
RAAOPS

for payroll
Cash Disbursing
Officers
Cash in Bank LCCA
8. Payment of Salaries
Salaries per Payroll
P 30,000
Salaries and Wages

Regular Pay
Cash Disbursing
73
110
100,000
107
110
25,000
801
30,000
25,000
Particulars
Less: Deductions
(Personal Share)
Life & Ret. P 2,850
Pag-ibig
600
Account Title
Officers
Withholding Taxes
Payable
PhilHealth
500
W/holding Tax 1,050
5,000
Net Pay per Payroll
P25,000
GSIS Payable
PAG-IBIG Payable
PHILHEALTH
Payable
9. Remittance of salary
deductions
Withholding Taxes
Payable
GSIS Payable
PAG-IBIG Payable
PHILHEALTH
Payable
Cash in Bank LCCA
10. Obligation for

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

Insurance
Contributions
PAG-IBIG
Contributions
PHILHEALTH
Contributions
Cash in Bank LCCA
12. Obligation of
Traveling Expenses
P500
Memo entry in
RAAOMO
74
Acct.
Code
107
Debit
Credit
25,000
410
1,050
411
412
2,850
600
413
500
410
411
412
1,050
2,850
600
413
110
500
817
2,850
818
500
819
110
600
5,000
3,950
Particulars

advance
Account Title
Acct.
Code
Due from Officers &

Employees
Cash in Bank LCCA
128
110
500
831
480
Traveling Expenses
Local
Due from Officers &
Employees
Debit
500
128
480
15. Adjustment of
obligation of travel.
Memo entry in
RAAOMO
16. Refund of cash

advance
Cash in Treasury
Due from Officers &
Employees
101
Cash in Bank LCCA

Cash in Treasury
110
101
20
835
110
800
149
500
17. Deposit of cash refund
18. Obligation of bill

received from
MERALCO
Memo entry in
RAAOMO
19. Payment of
MERALCO bill
P800
Electricity
Cash in Bank LCCA
20. Obligation for the

purchase of Office
Supplies P500
Memo entry in
RAAOMO
21. Payment of office

supplies
Office Supplies
Inventory
Withholding Taxes
Payable
Cash in Bank LCCA
22. Obligation of
Equipment per
Memo entry in
RAAOCO
75
20
128
410
110
Credit
20
20
800
20
480
Particulars
Purchase Order
P30,000
Account Title
Acct.
Code
Debit
30,000
23. Payment of equipment

with Invoice/Delivery
Receipt
Office Equipment
Withholding Taxes
Payable
Cash in Bank LCCA
222
24. Receipt of fund

transfer from General
Fund thru bank
Cash in Bank LCCA

Subsidy from Other
Funds
110
410
110
Credit
3,000
27,000
5,000
605
5,000
Adjusting Entries:
1. Depreciation of
Equipment using the
Straight Line Method:
Equipment :
Life Amount
5 yrs. P6,000
DepreciationOffice
Equipment
Accumulated
Depreciation
Office Equipment
922
6,000
322
6,000
Closing Entries :
1. Closing of Income
Accounts
2. Closing of Expense
Accounts

Subsidy from Other
Funds
Income and Expense
Summary
Income and Expense
Summary
Salaries & Wages
Regular Pay
Life & Retirement
Insurance
Contributions
PAG-IBIG
Contributions
PHILHEALTH
Contributions
Traveling Expenses
76
713
100,00
0
605
5,000
532
532
105,000
41,230
801
30,000
817
2,850
818
600
819
500
Particulars
3. Closing of Income and

Expense Summary
4. Closing of Retained
Operating Surplus
Account Title
Local
Electricity
DepreciationOffice
Equipment
Income and Expense

Summary
Retained Operating
Surplus
Retained Operating
Surplus
Government Equity
Acct.
Code
831
835
Credit
480
800
922
6,000
532
Debit
63,770
534
534
501
63,770
63,770
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
PROCESS
PERSON / UNIT
RESPONSIBLE
1. Gather supporting documents,

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

to the Accounting Unit.
Supervisor/Head of
Department
3. Check
completeness
of
documents and verify existence
of funds held in trust, assign
number to DV/Payroll, sign
Box B and forward to
Treasurer.
Accounting Unit
4. Verify
Treasurer
claim,
certify
cash
79
PROCESS
PERSON / UNIT
RESPONSIBLE
availability (Box C) and

forward to approving officer.
5. Approve transaction (Box D)
and forward DV to Cashier.
Local Chief
Executive/
Administrator of
the Fund
6. Prepare and sign check and

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

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

individual checks/voucher; sign
Prepared By portion (approved
by Chief Accountant), and
record JEV in the Check
Accounting Unit
80
PROCESS
PERSON / UNIT
RESPONSIBLE
Disbursements Journal. Post

monthly
to
the
General
Ledger/Subsidiary Ledgers
11. Forward RCI, DV, supporting
documents and JEV to the Office
of the Auditor for final custody
and post audit.
Accountant
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:
Particulars
Account Title
Acct.
Code
Debit
1. Receipt of grant from NGA

a. Receipt of grant
direct to bank from
NGA for:
a. Construction of
Cash in Bank LCCA
81
110
2,500,000
Credit
Particulars
road P2M
b.
Purcha
se of
construction
Equipment
P500,000
Account Title
Project Equity
502-01 P2,500,000
b. Issuance of check
with approved DV
for payment to
contractor upon
receipt of first
billing 50%
accomplished
Construction in
Progress
Roads, Highways &
Bridges
Withholding Taxes
Payable
Cash in Bank LCCA
Acct.
Code
502
232
Credit
2,500,000
1,000,000
410
110
c. Submission of
statement of
disbursements to
grantor
100,000
900,000
No entry
d. Issuance of check
with approved DV
for payment to
contractor upon
receipt of second
billing 100%
accomplished
Construction in
Progress Roads,
Highways &
Bridges
Withholding Taxes
Payable
Cash in Bank LCCA
e. Transfer of
completed
construction to
Public
Infrastructure
Construction in
Progress
Roads, Highways
& Bridges
f. Remittance of taxes
w/held
Withholding Taxes
Payable
Cash in Bank LCCA
g. Purchase of
Debit
Construction and
82
232
1,000,000
410
110
243
100,000
900,000
1,000,000
232
410
110
1,000,000
200,000
200,000
Particulars
equipment
h. Payment of
withholding tax
i. Submission of full
liquidation to
grantor and transfer
of completed road
and equipment to
GF for LGU use
Account Title
Heavy Equipment
Withholding Taxes
Payable
Cash in Bank LCCA
Withholding Taxes
Payable
Cash in Bank LCCA
Project Equity
Construction and
Heavy Equipment
Acct.
Code
212
Debit
500,000
410
110
Credit
50,000
450,000
410
110
50,000
502
243
2,500,000
50,000
2,000,000
212
500,000
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:
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
Equity to
Government Equity
Invested Equity
Government Equity
537
502
2,500,000
b. Transfer of Public
Infra- structure to
RPI
Government Equity
502
243
2,000,000
Sec. 18 2.
2,500,000
Receipt of grant with counterpart fund from LGU
a.
Project
budget
as
agreed upon
between
grantor and
LGU
for
project:
83
2,000,000
Particulars
Account Title
Acct.
Code
Debit
Credit
Grantor
Building 1.2M
Equipment - .3M
LGU Funded
Office supplies -1M
Salaries of project
Personnel - .4M
Total
2M
b.
Receipt of funds
from foreign
funding institution
thru national
government agency
Cash in Bank LCCA

Project Equity
502-01 - 1,500,000
502-02 500,000
110
502
2,000,000
889
110
500,000
230
500,000
2,000,000
Note: Entry in LGU General Fund books shall be

Grants and Donations
Cash in Bank LCCA
500,000
c. Issuance of check
with approved DV
for payment to
contractor
for
Construction
of
Building,
50%
accomplished.
Construction in
Progress
Agency Assets
Withholding Taxes
Payable
Cash in Bank LCCA
d. Remittance of
withholding tax
Withholding Taxes
Payable
Cash in Bank LCCA
410
110
50,000
Cash Disbursing
Officers
Cash in Bank LCCA
107
110
170,000
e.
Issuance of check
with approved DV
for cash advance on
salaries and wages
of project
administrative
personnel
84
410
110
50,000
450,000
50,000
170,000
Particulars
f. Liquidation of Cash
Advances
g.
Remittance of tax
withheld
Account Title
Salaries and Wages
Casual/
Contractual
Withholding Taxes
Payable
Cash Disbursing
Officers
Acct.
Code
803
Debit
200,000
410
30,000
107
170,000
Withholding Taxes
Payable
Cash in Bank LCCA
410
110
30,000
h. Issuance of check
with approved DV
for purchase of
supplies and
materials
Office Supplies
Inventory
Cash in Bank LCCA
149
110
100,000
i. Issuance of office
supplies
Office Supplies
Expenses
Office Supplies
Inventory
849
60,000
j. Purchase of IT
equipment
k.
Remittance of
withholding tax
l. Issuance of check
for installation of
equipment
30,000
100,000
149
IT Equipment and
Software
Withholding Taxes
Payable
Cash in Bank LCCA
215
60,000
250,000
410
110
25,000
225,000
Withholding Taxes
Payable
Cash in Bank LCCA
410
110
25,000
IT Equipment and
Software
Cash in Bank LCCA
215
110
50,000
85
Credit
25,000
50,000
Particulars
End of Year
m.Closing. of expenses
to Project Equity
Account Title
Project Equity
502-02 - P260,000
Salaries and Wages
Casual/ Contractual
Office Supplies
Expenses
Acct.
Code
502
Debit
Credit
260,000
803
200,000
849
60,000
Sec. 19 Succeeding
year
n. Issuance of check
with approved DV
for payment to
contractor for
Construction of
Building 100%
accomplished.
o. Remittance of
withholding tax
p. Transfer of
construction in
progress to property,
plant and equipment
account
Construction in
Progress
Agency Assets
Withholding Taxes
Payable
Cash in Bank LCCA
Withholding Taxes
Payable
Cash in Bank LCCA
Property Plant and
Equipment
Building
Construction in
Progress Agency
Assets
q. Issuance of check
for cash advance on
salaries and wages
Cash Disbursing
Officers
Cash in Bank LCCA
r. Liquidation of
salaries and wages
Salaries and Wages

Casual/Contractual
Withholding Taxes
Payable
Cash Disbursing
Officers
s. Remittance of
withholding tax
Withholding Taxes
Payable
Cash in Bank LCCA
86
230
700,000
410
110
70,000
630,000
410
110
70,000
204
1,200,000
70,000
230
1,200,000
107
110
170,000
803
200,000
170,000
410
30,000
107
170,000
410
110
30,000
30,000
Particulars
t. Issuance of office
supplies
End of Year
u. Closing of
expenses to
Project Equity
Project Completion
v.
Transfer of
buildi
ng
and
equip
ment
to the
Gene
ral
Fund
as
follow
s:
General Fund Books:
At end of year:
Account Title
Office Supplies
Expenses
Office Supplies
Inventory
Acct.
Code
849
Debit
40,000
149
40,000
Project Equity
Salaries and Wages
Casual/
Contractual
Office Supplies
Expenses
502
Project Equity
Building
IT Equipment and
Software
502
204
Building
IT Equipment and
Software
Invested Equity
204
1,200,000
215
537
300,000
Invested Equity
Government Equity
537
501
1,500,000
87
Credit
240,000
803
200,000
849
40,000
1,500,000
1,200,000
215
300,000
1,500,000
1,500,000
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
General Fund Proper
Market Operation
Slaughterhouse Operation
Waterworks System
Electric, Light and Power System
Telephone System
Toll Roads, Bridges and Ferries
Transportation System
Hospital
School
Sports Center
Recreational Center
Housing Projects
Convention/Conference Center
Parking Space
Ice Plant
Cemetery
20% Development Fund
80% Share from Energy Sources
Share from Development of National Wealth
Loans
89
SUB-CODE
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19
20
21
SPECIAL ACCOUNT
SUB-CODE
22
23
Sec. 13Interests
Sec. 14Bond Issues
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. 20
Sec. 21 Transaction
Acct.
Code
a. Receipt of Share from IRC for P100,000.

Cash in Bank LCCA
Cash in Bank LCCA
(01) P80,000
(18)
20,000
Share from Internal Revenue Collections (IRC)
Share from IRC
(01) 80,000
(18)
20,000
110
Sec. 22 Sec. 24
Sec. 23 Sec. 25
Debit
Credit
100,000
746
100,000
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
Cash in Treasury
Cash in Treasury
Discount on RPT
Discount on RPT
RPT Receivable
RPT Receivable
Business Taxes & Licenses
Business Taxes & Licenses
(01)
(02)
108,500
40,000
(01)
6,500
(01)
65,000
(01)
50,000
(02)
40,000
c. Requisition of Office Supplies for the following:

Operation of Market
P10,000
Programs under the 20% Dev. Fund
2,000
Office of the Treasurer
8,000
d. Obligation of the requested supplies.
101
148,500
937
6,500
124
65,000
723
50,000
783
40,000
No accounting entry
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
8,000
Total
20,000
Less: Withholding tax
1,000
Net
19,000
91
Sec. 20
Sec. 21 Transaction
Office Supplies Inventory
Cash in Bank LCCA
Cash in Bank - LCCA
Acct.
Code
149
(01)
(02)
(18)
8,000
10,000
2,000
(01)
7,600
Cash in Bank - LCCA
(02)
9,500
Cash in Bank - LCCA
(18)
1,900
Withholding Taxes Payable
(01)
400
(02)
500
(18)
100
Sec. 22 Sec. 24
Sec. 23 Sec. 25
Debit
Credit
20,000
110
19,000
410
1,000
f. Report of Utilization of Office Supplies

Operation of Market
2,000
3,000
20% Dev. Fund
1,000
Office Supplies Expenses
849
Office Supplies Expense
(01)
3,000
(02)
2,000
(18)
1,000
g.
149
(01)
3,000
(02)
2,000
(18)
1,000
Request for procurement of office equipment

of the following offices.
Office of the Accountant
5,000
Office of the Market Master
6,000
6,000
No accounting entry
4,000
h. Obligation of the requested equipment
92
Entry in the RAAOCO
Sec. 20
Sec. 21 Transaction
i.
Acct.
Code
Debit
Credit
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
Office Equipment
(01)
4,800
Office Equipment
(02)
4,000
Withholding Taxes Payable (01)
240
Withholding Taxes Payable (02)
200
8,800
410
Cash in Bank LCCA
j.
Sec. 22 Sec. 24
Sec. 23 Sec. 25
440
110
Cash in Bank LCCA
(01)
4,560
Cash in Bank LCCA
(02)
3,800
Obligation of Subsidy to the Operation of the

Market from the GF Proper for P12,000
8,360
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

Cash in Bank LCCA
Cash in Bank LCCA
l.
110
12,000
(01) 12,000
Receipt of the transferred funds.

Cash in Bank LCCA
Cash in Bank LCCA
110
12,00
0
(02) 12,000
Subsidy from Special Accounts
606
Subsidy from Special Accounts (02) 12,000
93
12,000
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
Beg. Balance
per actual
inventory
Date
Received
Issued
Jan. 1
Balance
200 @
P10
96
P2,000
Delivery
Receipt/
Invoice No.
RIS No.
Jan 12
Delivery
Receipt/
Invoice No.
RIS No.
Jan. 26
400 @
12
4,800
Jan. 16
500 @
11.33
300 @
11
3,300
Jan. 29
Delivery
Receipt/
Invoice No.
Jan. 30
200 @
11.09
100 @
12
5,665
1,200
2,218
600 @
11.33
100 @
11.35
400 @
11.09
200
@11.09
300 @
11.39
6,800
1,135
4,435
2,217
3,417
(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:
PROCESS
PERSON / UNIT
RESPONSIBLE
a. Prepare Purchase Request (PR) for

supplies and materials needed for
the quarter based on the approved
annual procurement program, at
the beginning of the year and of
each subsequent quarters.
Office of the General

Services Officer
(GSO) or the
Municipal Treasurer
as the case maybe.
b. Prepare ALOBS covering the

requisition under the PR.
Office of the GSO or

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
and the Local
Treasurer, for the PR.
d. Prepare Purchase Order.
GSO/Local Treasurer
100
PROCESS
PERSON / UNIT
RESPONSIBLE
e. Approve Purchase Order.
f. Receive delivered items, prepare

Acceptance and Inspection Report
(AIR) and signs acceptance
portion.
GSO/Local Treasurer
g. Inspect
items,
and
signs
inspection portion of the AIR.
Property Unit/LGU
Inspector
h. Record delivered items in the

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

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
PROCESS
PERSON / UNIT
RESPONSIBLE
the entries in the ledger cards

recorded on the basis of the AIR.
j.
Prepare Stock Availability Inquiry

(SAI) and forward to Accounting
Unit.
k. Verify
records,
requisitioning unit.
l.
advise
Prepare Requisition and Issue Slip

(RIS) and forward to Property
/Supply Unit.
Requisitioning Unit
Accounting Unit
Requisitioning Unit
m. Release supplies/equipment and

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

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

SSMI, and record withdrawals in
Accounting Unit
102
PROCESS
PERSON / UNIT
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. 14Particulars
Sec. 15Account
Title
Acct.
Code
Debit
Credit
1. Supplies and Materials

1.1 Spare parts Issuance of PR for
spare parts
(enter Obligation in
the RAAOMO- P100)
Record delivery of
items and charge
invoice, if
155
401
Payment of Invoice
If Procurement is on
Cash
100

Accounts Payable
procurement is on
credit
1
00
401
Accounts Payable
Withholding
Taxes
Payable
Cash in Bank LCCA
Withholding Taxes
Payable
Cash in Bank LCCA
Motor Vehicles
Maintenance
100
410
110
155
20
80
100
410
110
20
80
878
155
50
149
100
50
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.
Record delivery of
Office Supplies
Inventory
Accounts Payable
104
401
100
Sec. 13
Sec. 14Particulars
Sec. 15Account
Title
Acct.
Code
Debit
Credit
items and charge

invoice, if
procurement is on
credit.
Payment of Charge
Invoice
If procurement is on
cash basis
Accounts Payable
Withholding Taxes
Payable
Cash in Bank LCCA
Office Supplies
Inventory
Withholding Taxes
Payable
Cash in Bank LCCA
Office Supplies
Expenses
Office Supplies
Inventory
401
100
410
110
149
20
80
100
410
110
849
20
80
100
149
100
Withdrawal of
Office Supplies for
office use.
1.3
Accountable
Forms Issuance of PR for
the RAAOMO
P100.00)
accountable forms
Procurement on a
cash basis
Accountable Forms
Inventory
Withholding Taxes
Payable
Cash in Bank LCCA
Accountable Forms
Expenses
Accountable Forms
Inventory
Withdrawal of office
supplies
2. Equipment
105
148
100
410
110
848
148
20
80
100
100
Sec. 13
Sec. 14Particulars
2.1
Title
Acct.
Code
Debit
Credit
Office Equipment Issuance of PR for

Office Equipment
-P20,000
RAAOCO-P20,000)
Record charge
invoice and
Delivery of item.
Office Equipment
Accounts Payable
Payment of
delivered
Equipment
2.2
Sec. 15Account
Accounts Payable
Withholding Taxes
Payable
Cash in Bank LCCA
222
401
401
20,000
20,000
20,00
0
410
110
2,000
18,000
Issuance of PR for
Furniture
and
Fixture - P20,000
(Enter Obligation in
RAAOCO-P20,000)
Record Charge
Invoice and delivery
of item
Furniture and Fixtures

Accounts Payable
224
401
20,000
Payment of
delivered furniture
and fixture
Accounts Payable
Withholding Taxes
Payable
Cash in Bank LCCA
401
20,000
20,000
410
110
2,000
18,000
3. Non-Personal Services
3.1 Security Services Issuance of contract
for security services
- P120,000
the RAAOMOP120,000)
Receipt of monthly
Billing- P10,000
Security and Janitorial

Services
Accounts Payable
Payment of monthly
billing
Accounts Payable
Withholding Taxes
Payable
Cash in Bank LCCA
106
858
401
10,000
401
10,000
410
110
10,000
1,000
9,000
Sec. 13
Sec. 14Particulars
Sec. 15Account
Title
Acct.
Code
Debit
Credit
3.2 Plumbing Services Signing of contract

for Plumbing
Services P120,000
the RAAOMOP120,000)
Receipt of monthly
billing P10,000
General Services
Accounts Payable
857
401
10,000
Payment of Monthly
Billing
Accounts Payable
Withholding Taxes
Payable
Cash in Bank LCCA
401
10,000
107
410
110
10,000
1,000
9,000

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MANUAL ON THE

NEW GOVERNMENT ACCOUNTING

THE ACCOUNTING POLICIES

Sec. 01. Objectives of the Manual

Chapter 2. Basic Features and Policies

Sec. 04. Basic Features and Policies

Chapter 3. Accounting System

Sec. 2 General Accounting Plan

Sec. 3 Budgetary Accounts

Sec. 4 Income/Collections and Deposits

Sec. 6 Miscellaneous Transactions

Sec. 7 Adjusting, Closing and Reversing Entries

Chapter 4. Trial Balance, Financial Reports and Statements

Chapter 5. Special Funds

Definition of Trust Fund

Chapter 6. Special Accounts

Definition of Supplies or Property

Status of Appropriations, Allotments and

THE NEW GOVERNMENT ACCOUNTING SYSTEM MANUAL

Uniform guidelines and procedures in

Chapter 2. BASIC FEATURES AND POLICIES

Public utilities and other

The Books of Accounts are as

All the above records shall be maintained by the

Cashbook Cash in Treasury

The Treasurers/Collectors shall prepare the Report of

The following statements shall

Notes to Financial Statements shall accompany

The two money-column trial balance

h. Appropriations, Allotments and Obligations. Journal

Financial Expenses. Financial expenses such as bank

Perpetual Inventory of Supplies and Materials.

k. Valuation of Inventory. Cost of ending inventory of

Maintenance of Supplies and Property, Plant and

m. Construction of Assets. For assets under construction,

A Summary of all Public Infrastructures (based

Interest Accrual. Whenever applicable and appropriate,

u. Accounting for Borrowings and Loans.

Sec. 8 Chapter 3. ACCOUNTING SYSTEM

The local sanggunian approves the annual budget thru the

Budgetary reserves which are stand by appropriations

made by an accountable officer for and in behalf of the local

Forwards the advice

Office of the Budget

Accountant and returns the work plan

Enters the allotments

Certifies the ALOBS

Certifies the ALOBS

At the end of each

Budget Officer and

Sec. 12. Terminology and Classification. A common

Allowances (e.g. PERA, hazard pay, RATA,

INCOME/COLLECTIONS AND DEPOSITS

Sec. 13. Separation of Books and Depository Accounts.

Subsidy from Other LGUs

Gain on Sale of Assets

Sec. 19. Methods of Accounting for Income. The

Accrual method of accounting shall be used to record

Income/Deferred Special Education Tax Income. Real

Cash Basis Cash basis

Sec. 20. Basis of Recording Real Property Tax/Special

recognized as a direct credit to Real Property Tax Income/Special

Sec. 25. Borrowings. Borrowings are proceeds of