lgu ngas ch3 acctgsystemvol1

7/27/2019 LGU NGAS Ch3 AcctgSystemVol1

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Chapter 3. ACCOUNTING SYSTEM

A. GENERAL ACCOUNTING PLAN

Sec. 05. General Accounting Plan. The GeneralAccounting 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.

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INSERT HERE TABLE 1

GENERAL ACCOUNTING PLAN (MS Excel file)

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The local sanggunian approves the annual budget thru

the issuance of appropriation ordinance. On the first business

day of the fiscal year, the entire annual budget of 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 bodyand 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 tothe amounts committed to be paid by the LGU for any lawful act

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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 ChiefAccountant 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:

P R O C E S S 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

Accountant and returns the work planto the concerned departments/ offices.

Office of the Budget

Officer

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RESPONSIBLE

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 andforwards 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 Statusof 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

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Sec. 12. Terminology and Classification. A common

terminology and classification shall be used consistently throughout

the budget, the accounts and the financial reports.

For this purpose, the following specific expenditures shall be

recorded in the appropriate RAAOs:

a. RAAOCO

Investments outlay (e.g. stocks, bonds)

Land, Land Improvements and Leasehold

Improvements outlay

Buildings and Other Structures outlay (e.g.

school buildings, markets and

slaughterhouses, hospital and health centers,

etc.)

Public Infrastructures outlay (e.g. parks, plaza,

monuments, bridges etc.)

Furniture and Fixtures outlay

Work Animals outlay

Breeding stocks

Machineries and Equipment outlay (e.g. dump

trucks, construction equipment, industrial

machineries, technical and scientific

equipment, etc.)

Aircrafts, Trains and Motor Vehicles outlay

(e.g. motorcycles, cars, vans, etc.)

Artesian Wells, Reservoirs, Pumping Stations

and Conduits outlay

Books outlay

Ordnance outlay

IT Equipment and Software outlay

Other Property, Plant and Equipment outlay

Reforestation Projects

Arts, Archeological Specimen and Other

Exhibits

b. RAAOPS

Salaries and Wages (e.g. regular pay, part-time

pay, overtime and night pay, holiday pay, etc.)

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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, exceptdepreciation, obsolescence,bad debts, loss on sale of assets, loss of assets,

discount on Real Property Tax and Special

Education Tax.

d. RAAOFE

Bank Charges

Interest Expenses

Commitment Charges

Other Financial Charges (e.g. underwriting

fees, guarantee fees)

Loan Amortization

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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 treasuryof 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 generalincome accounts and specific income accounts.

Sec. 17. General Income Accounts. The following shall

comprise the General Income Accounts applicable to LGUs:

a. Subsidy from Other LGUs

b. Subsidy from Other Funds

c. Subsidy from Special Accounts

d. Sales Revenue

e. Dividend Income

f. Interest Income

g. Gain on Sale of Securitiesh. Gain on Sale of Assets

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i. Sale of Confiscated Goods and Properties

j. Foreign Exchange (FOREX) Gains

k. Miscellaneous Operating and Service

Income

l. Fines and Penalties Government Services

and Business Operations

m. Income from Grants and Donations

Sec. 18. Specific Income Accounts. The following major

classification comprise the specific income accounts for LGUs:

1. Property Taxes

2. Taxes on Goods and Services

3. Other Taxes

4. Other Specific Income

Sec. 19. Methods of Accounting for Income. The

following accounting methods shall be adopted in recording income:

a. Accrual Method

Accrual method of accounting shall be used to record

Share from Internal Revenue Collections in the books of

accounts. Upon receipt of the Notice of Funding Check

Issued from Department of Budget and Management

(DBM), Share from Internal Revenue Collections shall

be taken up as Due from NGAs and credited to Share

from Internal Revenue Collections. However, Cash in

Bank shall be debited upon receipt of Bank Credit

Advice as to receipt of the Share from Internal Revenue

Collections regardless of whether or not the Notice ofFunding 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 TaxesIncome/Deferred Special Education Tax Income. Real

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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 theRPT 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

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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 EducationFund.

Sec. 24. Other Receipts. Other receipts of the local

government units shall be comprised of, but not limited to, the

following:

a. Borrowings

b. Sale of Property, Plant and Equipment

c. Refund of Cash Advances

d. Receipt of Performance/Bidders Bonds

Sec. 25. Borrowings. Borrowings are proceeds ofrepayable 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 becredited upon transfer of ownership.

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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 sameagainst the new balances on hand column. He shall indicate his

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verification by affixing his signature at the back of the triplicate copy

of the last official receipt issued. He shall count the money turned

over to him and sign the certification and receipt portion of all copies

of RCD.

Sec. 31. Designation of Liquidating Officers. The

Treasurer may designate liquidating officers from among the

collectors/tellers whenever necessary.

a.

Collectors/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.

The liquidating officer shall perform the procedures for thereceipt 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.

The 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 accompanyingdocuments 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.

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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 submittedby the Treasurer/Cashier and shall accomplish the Journal Entry

Voucher. The accountant shall also maintain the Abstract of Real

Property Tax Collections to facilitate the distribution and remittance

of the shares of the different government units concerned in the real

property tax collections.

Sec. 35. Receipts and Collection Process. The following

is a summary of the receipt and collection process in the LGU:


RESPONSIBLE

a. Receive payment

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 theTreasurer/Cashier. Prepares RCD.

Liquidating

Officer

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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. 36. Proforma Accounting Entries. The following

are pro-forma accounting entries for income, collection and deposit:

Particulars Account Title

Acct.

Code Debit Credit

I N C O M E

1.Real Property Tax Basic

A. Books of the

Municipality

a. Setting-up of RPT

Receivable

Real Property Tax

Receivable 124 1,000RPT = P1,000 Deferred Real

RPT Sharing:

Municipal - 40%

Property Tax Income 448 1,000

Province - 35%

Barangay - 25%

b. Receipt of Cash in Treasury 101 100

Payment Real Property TaxReceivable 124 100

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Acct.

Code Debit Credit

c. Distribution of

CollectionRPT Sharing:

Deferred Real Property

Tax IncomeReal Property Tax

448711

10040

Municipal - 40% Due to LGUs 431 60Province - 35%Barangay - 25%

d. Deposit of Collections Cash in Bank LCCACash in Treasury

110101

100100

e. Remittance of Share

(Province)

Due to LGUs

Cash in Bank LCCA

431

110

35

35

f. Remittance of Share(Barangay)

Due to LGUsCash in Bank LCCA

431110

2525

B. Books of the

Province

a. Upon receipt of the

Summary of the JEVfrom the Municipal

Accountant

Due from LGUs

Real Property Tax

131

711

35

35

b. Upon receipt of share Cash in Bank LCCADue from LGUs

110131

3535

2. Operating and Service Income

a. Receipt of Income Cash in Treasury 101 100Receipts from Markets

Garbage Fees

783

772

90

10

b. Deposit of Collections Cash in Bank LCCACash in Treasury

110101

100100

3. Share from Internal Revenue Collections

a. Receipt of Notice ofFunding Check Issued

from the DBM andcredit memo from

Cash in Bank LCCAShare from Internal

Revenue Collections

110

746

1,000

1,000

the bank for Sharefrom Internal Revenue

Collections

b. Receipt of Notice of Due from NGAs 130 1,000

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Acct.

Code Debit Credit

Funding Check Issued Share from Internal

from the DBM for

Share from InternalRevenue Collections

Revenue Collections 746 1,000

4. Grants and Donations

a. Receipt of grants anddonations in cash

(Donations in kindshall be booked-up

using the appropriateasset account)

Cash in TreasuryIncome from Grants

and Donations

101

651

100

100

b. Receipt of grants anddonations in kind -

Motor Vehicle:

Motor VehiclesInvested Equity

218537

800800

Original Cost P1,000

Less: Acc. Depn. 200

(At the end of Year)

Invested Equity 537 800Book Value P 800 Government Equity 501 800

5. BORROWINGS

a. Receipt of borrowedfunds from bank -

Principal - P1,000Bank Charges - 10

Interest Expense- 12

Cash in Bank LCCALoans Payable

Current, Domestic

110

403

1,000

1,000Bank Charges

Interest Expenses

951

952

10

12Cash in Bank LCCA 110 22

b. Receipt of borrowed

funds from otheragency -

Cash in Treasury

Loans Payable Current, domestic

101

403

1,000

1,000

Principal - P1,000 Interest Expenses 952 6Interest Expense - 6 Cash in Bank LCCA 110 6

c. Payment of loanamortization

Loans Payable Current, Domestic 403 200

Cash in Bank - LCCA 110 200

6. SUBSIDIES

a. Subsidy from Other Funds (General Fund to Special Education Fund)

GENERAL FUND BOOKS

Transfer of subsidy Subsidy to Other Funds 897 500

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Acct.

Code Debit Credit

to Special Education

Fund (Aid to SEF tofinance its projects)

Cash in Bank LCCA 110 500

SPECIAL EDUCATION FUND BOOKS

Receipt of subsidy fundsfrom Other funds

Cash in TreasurySubsidy from Other

101 500

Funds 605 500

b. Special Accounts (subsidy from General Fund proper to Operation of Public

Market)

BOOKS OF GENERAL FUND PROPER

Transfer of subsidy toSpecial Account

Subsidy to SpecialAccounts 898 500


BOOKS OF SPECIAL ACCOUNT (OPERATION OF PUBLIC MARKET)

Receipt of subsidy fromGeneral Fund Proper

Cash in Bank LCCASubsidy from Special

110 500

Accounts 606 500

7. REFUND OF CASH ADVANCES

a. Cash Advance by an Officer for Local Travel

a. To take up the cash

advance

Due from Officers &

Employees 128 10Cash in Bank LCCA 110 10

b. To take up refund ofcash advance

Cash in TreasuryDue from Officers &

Employees

101

128

10

10

b. Cash Advance by a Disbursing Officer for Salaries and Wages

a. To take up the cashadvance

Cash DisbursingOfficers 107 10


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Acct.

Code Debit Credit

b. To take up refund ofcash advance

Cash in TreasuryCash Disbursing

Officers

101

107

10

10

8. RECEIPT OF CASH BONDS

a. To take up receipt ofperformance bond in

cash

Cash in TreasuryPerformance/ Bidders/

Bail Bonds Payable

101

414

50

50

b. To take up deposit ofperformance bond

Cash in Bank LCCACash in Treasury

110101

5050

c. To take up refund ofperformance bond

Performance/ Bidders/Bail Bonds Payable 414 50


D. DISBURSEMENTS

Sec. 37. Disbursements. Disbursements refer to the

settlement of government payables/obligations by cash or by check.

Typical transactions for which disbursements are made are

as follows:

1. Personal Services

2. Maintenance and Other Operating Expenses3. Capital Outlay

4. Financial Expenses

Disbursements shall be covered by Disbursement Vouchers

(DV) or payrolls and paid either by check or in cash. The Allotment

and Obligation Slip (ALOBS) shall be an integral part of the DV.

Sec. 38. Certification on Disbursements. Disbursements

from the general fund shall require the following certifications on the

DV:

1. Certification and approval of vouchers and payrolls as to

validity, propriety and legality of the claim (Box A of

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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 orpermanent 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 caseof 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.

Sec. 41. Recording Check Disbursements in the

Cashbooks. All checks issued including cancelled checks shall be

recorded chronologically in the Cashbook Cash in Bank.

27


21/46

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:

P R O C E S S PERSON /

UNIT

RESPONSI

BLE

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

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22/46


UNIT

RESPONSI

BLE

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 tobank. 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 Accounting Unit

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UNIT

RESPONSI

BLE

based on individual checks/voucher;

sign Prepared By portion

(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 andmaintained 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 tothe 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.

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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

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 itssupporting 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 anOfficial Receipt to acknowledge the amount returned. A new

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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:


UNIT

RESPONSI

BLE

a. Processing of Payrolls to be paid

by cash is the same as that of steps

(a) to (e) for check disbursements.

Concerned

offices

b. Gather duly certified and approved

payrolls to be paid out of cash

advance. Prepare DV for cashadvance corresponding to the net

amount of payroll/s. Sign Box A of

DV and submit to the Accounting

Unit.

Office of the

Treasurer

c. Check completeness of documents/

previous cash advance liquidated,

assign number to DV, sign Box B

and forward to Approving Officer.

Accounting Unit

d. Approves DV and forward to

Treasurer for preparation of checks.

Local Chief

Executive

e. Prepare and sign check, and

forward check with DV to

countersigning officer.

Treasurer

f. Countersign check and forward to

Accountant for preparation of

Advice.

Administrator

g. Prepare Accountants Advice of

Local Check Disbursements and

Accountant

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UNIT

RESPONSI

BLE

return DV, check and supporting

documents to Cashier/Treasurer.

h. Encash check and pay claimants.

Record disbursement in Cashbook

Cash Advances.

Treasurer/

Disbursing

Officer

i. Return unused cash to the

Treasurer/ Cashier. An official

receipt (OR) shall be issued by the

Treasurer/Cashier to acknowledge

the return of unused cash and

indicate check no. of cash advance

granted on the face of OR. Recordthe refund as credit to cash advance

and attach OR to the Cashbook

Cash Advances.

Disbursing

Officer

j. Prepare Report of Disbursement,

attach paid payrolls/ supporting

documents and copy of OR for

unused cash advance returned to

Treasurer/Cashier. Sign "Certified

Correct portion of Report of

Disbursement and submit to

Accounting Unit.

Disbursing

Officer

k. Prepare JEV to record the

liquidation of cash advance.

Record JEV in the Cash

Disbursements Journal (CDJ). Post

monthly to the General Ledger/

Subsidiary Ledger.

Accountant

l. Forward Report of Disbursement

and supporting documents

including JEV to the Office of the

Auditor.

Accountant

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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.

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 theoryshall 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, theConstruction 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

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28/46

funded from loans shall be made in the Notes to Financial

Statements.

Sec. 51. Purchase of Supplies. Purchase of supplies and

materials for stock regardless of whether or not they are

consumed within the accounting period shall be recorded as

assets using the Inventory account following the Perpetual

Inventory Method (refer to Chapter 7 Supplies or

Property). However, supplies and materials purchased out

of the Petty Cash Fund for immediate use or for emergency

shall be taken up as expenses.

Sec. 52. Pro-forma Accounting Entries. Pro-forma

accounting entries for disbursement transactions are shown

below:


Acct.

Code Debit Credit

1. Payment through Cash Advances

a. Cash advance for personal services

Enter obligation in RAAOPS for P18,000 Salaries and Wages, P5,000Additional Compensation, and P3,000 Personnel Economic Relief

Allowance (PERA).

1. Grant of cash advancefor payroll

Cash DisbursingOfficers

Cash in Bank LCCA

107

110

21,000

21,000

2. Liquidation of cash

advance for payroll

Salaries and Wages

Regular PayP E R A

801804

18,0003,000

AdditionalCompensation 805 5,000

Withholding TaxesPayable 410 2,000

GSIS Payable 411 1,500PAG-IBIG Payable 412 1,500

Cash DisbursingOfficers 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

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Particulars Account TitleAcct.

Code Debit Credit

life and retirement

insurance and PAG-IBIG Contributions

Insurance

ContributionsPAG-IBIG

Contributions

817

818

1,500

1,500GSIS Payable 411 1,500PAG-IBIG Payable 412 1,500

b. Petty Cash Fund

For establishment of fund, Enter obligation in RAAOMO as Other Expenses for

P6,000

1. Release of cash

advance for pettycash fundmiscellaneous

expenses

Petty Cash Fund

Cash in Bank LCCA

105

110

6,000

6,000

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

Expenses P500, Office Equipment Maintenance P1,000 and OtherExpenses of P800.

2. Replenishment ofpetty cash fund

during the year

Traveling Expenses Local

Office SuppliesExpenses

831

849

500

2,500Office Equipment

Maintenance 882 1,000Other Expenses 950 800

Cash in Bank LCCA 110 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 831 1,000Office Supplies

Expenses 849 4,000

Petty Cash Fund 105 5,000

Cancel RAAOMO for setting up of petty cash fund at the start of the yearand refund for a total of P6,000.

4. Return of unusedPetty Cash Fund.

Cash in TreasuryPetty Cash Fund

101105

1,0001,000

36


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Code Debit Credit

c. Cash advance for travel

Enter obligation in RAAOMO for Travel of P1,000

1. Grant of cash advance Due from Officers and

Employees 128 1,000Cash in Bank LCCA 110 1,000

2. Liquidation of cash

advance during thecurrent year(assuming only P900

was utilized and P100was refunded)

Traveling Expenses

LocalDue from Officers and

Employees

831

128

900

900

Adjust RAAOMO for refund of cash advance of P100

3. For amount refunded

where official receiptwas issued

Cash in Bank LCCA

Due from Officers andEmployees

110

128

100

100

2. Payment by Check

a. Maintenance and Other Operating Expenses

Enter obligation in RAAOMO for rent P3,000

1. Payment of rent Rent Expense 841 3,000Cash in Bank LCCA 110 3,000

Enter obligation in RAAOMO for electricity of P1,500 andtelephone/internet of P2,000

2. Payment of utilities

(MERALCO andPLDT)

Electricity

Telephone/Telegraphand Internet

Cash in Bank LCCA

835

837110

1,500

2,0003,500

Enter obligation in RAAOMO for training and seminar expenses of P1,000

3. Payment of seminarfee

Training and SeminarExpenses 833 1,000


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Code Debit Credit

b. Financial Expenses

Enter obligation in RAAOFE for bank charges of P300

1. Bank charges upon

receipt of bankstatement

Bank Charges

Cash in Bank LCCA

951

110

300

300

Enter obligation in RAAOFE for interest expense of P400

2. Interest Expense Interest Expenses 952 400Cash in Bank LCCA 110 400

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

1. Issuance of PO todealer

No entry

2. Receipt of office

equipment

Office Equipment

Cash in Bank LCCA

222

110

6,000

6,000

d. Construction of Roads by Contract Enter obligation in RAAOCO for P800,000for construction of road.

1. Payment of firstbilling for 50%

accomplishment

Construction inProgress Roads,

Highways andBridges 232 400,000



2. Payment of secondbilling 100%

accomplishment

Construction inProgress Roads,




3. Remittance of taxeswithheld

Withholding TaxesPayable

Cash in Bank LCCA

410

110

80,000

80,000

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Code Debit Credit

If funded from regular agency income

4. To take up roads

completed

Public Infrastructure

Construction in

243 800,000

Progress Roads,


5. To transfer completed

roads to Registry ofPublic Infra- structures

at the end of the year

Government Equity

Public Infrastructures

501

243

800,000

800,000

Note: Using the JEV for the above transactions, the public infrastructures shallbe recorded in the Registry of Public Infrastructures.

If funded from a loan

6 To record completed Public Infrastructures 243 800,000roads Construction in

Progress Roads,Highways andBridges 232 800,000

At year end,upon full

payment of laon

Government EquityPublic Infrastructures

501243

800,000800,000

e. 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

No Entry

3. Payment forconstruction materials

received

Construction MaterialsInventory


Cash in Bank LCCA

156

410

110

600,000

60,000

540,000

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Code Debit Credit

4. Issuance of materialsP590,000

Construction inProgress Agency

Assets 230 590,000Construction Materials

Inventory 156 590,000

Enter obligation in RAAOCO for P380,000 for labor

5. Cash advance granted

to Disbursing Officerfor payroll

Cash Disbursing

OfficersCash in Bank LCCA

107110

350,000350,000

6. Liquidation by

Disbursing Officer ofpaid payroll

Construction in

Progress AgencyAssets 230 380,000

Withholding Taxes

Payable 410 30,000

Cash DisbursingOfficers 107 350,000

7. Remittance of

withholding tax

Withholding Taxes

PayableCash in Bank LCCA

410

110

30,000

30,000

8. Accomplishment

Report approved bythe LCE

Buildings

Construction inProgress Agency

Assets

204

230

970,000

970,000

f. Acquisition of Land

Enter obligation in RAAOCO for P2million for purchase of land

1. Payment made for

land purchased

Land


201

410

2M

200,000

Cash in Bank LCCA 110 1.8M

2. Remittance ofwithholding tax

Withholding taxesPayable 410 200,000


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Code Debit Credit

g. Land and Building

Enter obligation in RAAOCO for P600,000 for land and P400,000 for

building

1. Payment of the landand building

(assessed value ofland is P600,000) for

P1,000,000

LandBuilding


Cash in Bank LCCA

201204

410

110

600,000400,000

100,000

900,000

2. Remittance ofwithholding tax


Cash in Bank LCCA410110

100,000100,000

h. Purchase of Inventories

Enter obligation in RAAOMO for purchase of P2,500 worth of spare arts

1. Payment of deliveredspare parts

Spare Parts InventoryWithholding Taxes

Payable

155

410

2,500

250Cash in Bank LCCA 110 2,250

i.Enter obligation in RAAOMO for purchase of office supplies

1. Payment of office

supplies delivered

Office Supplies

InventoryWithholding Taxes

Payable

149

410

3,000

300Cash in Bank LCCA 110 2,700

j. Fund Transfers

Enter obligation in RAAOMO for subsidy to LGU XYZ

1. Cash assistance toLGU XYZ

Subsidy to LocalGovernment Units 895 30,000


k.Enter obligation in RAAOMO for subsidy to SEF

1. Cash transfer to SEF

as subsidy

Subsidy to Other

FundsCash in Bank LCCA

897110

10,00010,000

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Code Debit Credit

l.Enter obligation in RAAOMO for grants and donation to Trust Fund

1. Cash transfer to TrustFund as counterpart

LGU funds.

Grants and DonationsCash in Bank LCCA

889110

500,000500,000

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. Loss of Cash and Property Accountability

2. Cash Overage

3. Dishonored Check

4. Lost/Destroyed/Stale/Obsolete and Fraudulently

Encashed Check

5. Settlement of Suspensions/Disallowances/Charges

6. Refund of Overpayments

Sec. 54. Loss of Cash and Property. Loss ofcash 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 theaccountable officer concerned for purposes of requesting relief from

accountability. No accounting entry shall be made but the loss shall

42


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be disclosed in the notes to financial statements pending result of

request for relief from accountability.

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 bedebited 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 shallnote the cancellation in the triplicate copies of the receipt. The

43


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Treasurer shall then inform the Auditor who shall effect the

cancellation in the duplicate copy of official receipt, in case the same

has already been submitted for audit.

The Treasurer shall forward the debit memo and the

photocopy of the dishonored checks to the Accountant. The

Accountant shall cancel the official receipt if still in his

possession. He shall prepare the Journal of Entry Voucher

(JEV) taking up the dishonored check by crediting the Cash

in Bank account and debiting the appropriate income

account. In case of dishonor of check payments for Real

Property Tax (RPT) or Special Education Tax (SET), the

RPT/SET Receivables and corresponding Deferred

RPT/SET Income shall be restored. The accounts Due to

LGUs, RPT Income, Cash in Bank and RPT Discount shall

be adjusted accordingly. He shall furnish the Treasurer with

a copy of the duly approved JEV. The Treasurer shall record

the JEV number in the Cashbook-Cash in Bank as referencein 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 immediatelynotify 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.

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38/46

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:

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 andsupporting 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 berequested 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

45


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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.

Sec. 61. Pro-forma Accounting Entries. The following

the are pro-forma accounting entries for miscellaneous transactions:


Code Debit Credit

1. Cash Shortage

a. Cash shortage of the of the Disbursing Officer

To take up cash

shortage

Due from Officers and

Employees 128 50Cash Disbursing

Officers 107 50

b. Cash Shortage of the Treasurer

To take up cash

shortage


Employees 128 50Cash in Treasury 101 50

2. Grant of Relief from Accountability for Loss of Government Funds

To record the loss offund by a Disbursing

Officer (allegedly thrutheft ) = P50


Cash DisbursingOfficers

128

107

50

50

To take up relief from

accountability

Loss of Assets (current

year) or PriorYears adjustments

(prior years) 948 50Due from Officers and

Employees 128 50

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Code Debit Credit

3. Cash Settlement in case of denial of Request for Relief from

Accountability

To take uppayment/settlement

Cash in TreasuryDue from Officers and

Employees

101

128

50

50

4. Cash Overage

To take up cashoverage discoveredduring cash

examination

Cash in TreasuryOther Specific Income

of LGU

101

792

50

50

5. Dishonored Checks

From payment of real property tax in the current year or prior year

Upon receipt of advice

of dishonored checkand cancellation of

Official Receipt

Real Property Tax

ReceivableDeferred Real

Property TaxIncome

124

448

50

50

Due to LGUs 431 30

Real Property TaxIncome 711 20


Receipt ofrefund/settlement

Cash in TreasuryReal Property Tax

Receivable

101

124

50

50

6. Lost/Destroyed/Stale/Obsolete Checks

Check issued in the current/prior year for replacement

Check cancellation Cash in Bank LCCA 110 50

Accounts Payable 401 50

Replacement Accounts Payable 401 50Cash in Bank LCCA 110 50

7. Disallowances and Charges

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Code Debit Credit

a. Recording of disallowance for current years transaction

When the disallowancebecomes final and

executory

Receivables

Disallowances/Overpayment of Office

Supplies

Charges

Office Supplies

138 10

Amount paid - P100

Should be - 90

Expense 849 10

Difference - 10

Settlement of

Disallowance

Cash in Treasury

Receivables

101 10

Disallowances/

Charges 138 10

b. Recording of disallowance for prior years transaction

When the disallowance

becomes final andexecutory

Receivables

Disallowances/Charges 138 10

Prior YearsAdjustments 533 10

Settlement ofdisallowance

Cash in TreasuryReceivables

101 10


c. Settlement of Charges

c.1 Recording of charges which collection were made in the current year

When the chargebecomes final and

executory Underpayment of

Franchise Tax

Receivables

Disallowances/Charges

Franchise Tax

138

724

10

10Amount Paid - P 100

Should be - 110Charge - 10

Settlement Cash in Treasury 101 10

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Code Debit Credit

Receivables


c.2 Recording of charges which collection were made in the prior year

When the chargebecomes final and

executory

Receivables Disallowances/

Charges 138 10Prior Years

Adjustments 533 10

Settlement Cash in Treasury 101 10Receivables

Disallowances/

Charges 138 10

8. Refund of Overpayment

a. Overpayment taken up as receivable

To record overpayment

of salaries and wages(When overpayment is

ascertained)


EmployeesSalaries and Wages

Regular Pay

128

801

10

10

To record refund of

overpayment

Cash in Treasury


101

128

10

10

b. Refund of overpayment not taken up as receivable

Refund ofoverpayment of

Salaries and Wages Regular Pay during the

current year

Cash in TreasurySalaries and Wages

Regular Pay

101

801

10

10

To take up refund ofover payment in the

ensuing year

Cash in TreasuryPrior Years

Adjustments

101

533

10

10

F. ADJUSTING AND CLOSING ENTRIES

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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.

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 orrevenues 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 productivefacilities 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.

50


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Illustrative accounting entries:


Code Debit Credit

1. Report of supplies

utilized for P2,000.

Office Supplies

ExpenseOffice Supplies

Inventory

849

149

2,000

2,000

2. Application

of advance RPT forP2,500.

Deferred Credits to

IncomeReal Property Tax

440711

2,5002,500

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.



Code Debit Credit

1. Receipt of theNotice of Funding

Check Issued forthe DecemberShare from

Internal RevenueCollections forP20,000.

Due from NGAsShare from Internal

Revenue Collections

130

746

20,000

20,000

2. Unpaid salaries and

wages of employees,

Salaries and Wages

Regular Pay 801 50,000

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Code Debit Credit

at end of accounting

period, P50,000.

Due to Officers &

Employees

428 50,000

Sec. 66. Closing Journal Entries. Closing journal entriesare 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.

5. Debit all credit balances of the intermediate

accounts and debit the total to the Government

Equity account.

6. Credit all debit balances of the intermediateaccounts and credit the total to the Government

Equity account.



Code Debit Credit

1. To close the Revenue

accounts to theIncome and Expense

Summary account.

Real Property Tax

Share from InternalRevenue Collections

Business Taxes &

Licenses

711

746

723

100

10,000

50

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Code Debit Credit

Registration Fees

Income and ExpenseSummary

761

532

20

10,170

2. To close the

Income andExpense Summary

to RetainedOperating Surplus

account.

Income and Expense

SummaryRetained Operating

Surplus

532

534

5,670

5,670

3. To close the

Retained OperatingSurplus to

Government Equityaccount.

Retained Operating

SurplusGovernment Equity

534501

5,6705,670

53

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