Accounting For LGUs

THE NEW GOVERNMENT ACCOUNTING SYSTEM MANUAL
5.
Books of Accounts. The Books of Accounts are as follows:
For Local Government Units
6.
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
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)
b)
c)
7.
Uniform guidelines and procedures in accounting for government funds and property;
New coding structure and new chart of accounts; and
New accounting books, reports/forms, financial statements and accounting entries.
Sec. 02. Coverage. This Manual shall be used by all local government units (LGUs).
Sec. 03. Legal Basis. This Manual is prescribed by the Commission on Audit pursuant to Article IX-D,
Section 2 par. (2) of the 1987 Constitution of the Republic of the Philippines which provides that:
"The Commission on Audit shall have exclusive authority, subject to the limitations in this Article, to
define the scope of its audit and examination, establish the techniques and methods required therefor,
and promulgate accounting and auditing rules and regulations, including those for the prevention and
disallowance of irregular, unnecessary, excessive, extravagant, or unconscionable expenditures, or uses
of government funds and properties". (underscoring supplied)
8.
Chapter 2. BASIC FEATURES AND POLICIES
9.
Sec. 04. Basic Features and Policies. The new government accounting system has the following basic
features and policies, to wit:
10. Financial Statements. The following statements shall be prepared:
1.
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.
2.
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.
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.
Balance Sheet
Statement of Income and Expenses
Statement of Cash Flows
11. Notes to Financial Statements shall accompany the above statements.
3.
Special Accounts in the General Fund. Special accounts in the General Fund complete with
subsidiary ledgers, shall be maintained for the following:
4.
Public utilities and other economic enterprises;

Loans, interests, bonds issued, and other contributions for specific purposes;
Development projects funded from the Share in the Internal Revenue Collections;
and
Such other special accounts which may be created by law or ordinance.
12. Trial Balance. The two money-column trial balance shall be used.
13. 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:
Registry of Appropriations, Allotments and Obligations Capital Outlay (RAAOCO)

Registry of Appropriations, Allotments and Obligations Maintenance and Other
Operating Expenses (RAAOMO)
Registry of Appropriations, Allotments and Obligations Personal Services
(RAAOPS)
Registry of Appropriations, Allotments and Obligations Financial Expenses
(RAAOFE).
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.
14. 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).
25. 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.
15. 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.
26. 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.
16. Valuation of Inventory. Cost of ending inventory of supplies and materials shall be computed
using the moving average method.
27. Recognition of Liability. Liability shall be recognized at the time goods and services are
accepted or rendered and supplier/creditor bills are received.
17. 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.
28. Interest Accrual. Whenever applicable and appropriate, interest income and/or expense shall
be accrued and recognized in the books of accounts.
29. Accounting for Borrowings and Loans. All borrowings and loans incurred shall be recorded
direct to the appropriate liability accounts.
18. 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.
19. 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:
Registry of Public Infrastructure Bridges (RPIB)

Registry of Public Infrastructure Roads (RPIR)
Registry of Public Infrastructure Plazas, Monuments, etc. (RPIP)
20. 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.
21. Completed public infrastructures funded out of a loan shall, however, be retained in the
books of accounts until the loan is fully paid.
30. 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.
Chapter 3. ACCOUNTING SYSTEM

z
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.
22. A Summary of all Public Infrastructures (based on the different registries) shall be prepared
annually and included in the Notes to Financial Statements.
The General Accounting Plan (Table 1) is presented as to the following type of transactions:
1)
2)
3)
23. 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.
4)
24. 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.
B.
Appropriations, Allotments and Obligations

Collections and Deposits
Disbursements
a) By cash
b) By check
Miscellaneous and Other transactions
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.
GENERAL ACCOUNTING PLAN (MS Excel file)
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:
1.
2.
3.
4.
Registry of Appropriations, Allotments and Obligations - Capital Outlays (RAAOCO)

Registry of Appropriations, Allotments and Obligations - Maintenance and Other Operating
Expenses (RAAOMO)
Registry of Appropriations, Allotments and Obligations - Personal Services (RAAOPS)
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 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
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 Accountant and returns the work plan
to the concerned departments/ offices.
Office of the Budget Officer
c)
Enters the allotments in the RAAOs.
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.
h) At the end of each month, reconcile records

on allotments available for obligation.
Budget Officer and

Chief Accountant
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
b. RAAOPS
c. RAAOMO
d. RAAOFE
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
Salaries and Wages (e.g. regular pay, part-time pay, overtime and night pay,
holiday pay, etc.)
Allowances (e.g. PERA, hazard pay, RATA, etc.)
Benefits (e.g. bonus, cash gifts, productivity, pension, etc.)
Government Shares on Employees Contributions
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.
Bank Charges
Interest Expenses
Commitment Charges
Other Financial Charges (e.g. underwriting fees, guarantee fees)
Loan Amortization
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.
b.
c.
Tax revenues, fees and charges

Share from Internal Revenue Collections
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.
h.
i.
j.
k.
l.
m.
Subsidy from Other LGUs

Subsidy from Other Funds
Subsidy from Special Accounts
Sales Revenue
Dividend Income
Interest Income
Gain on Sale of Securities
Gain on Sale of Assets
Sale of Confiscated Goods and Properties
Foreign Exchange (FOREX) Gains
Miscellaneous Operating and Service Income
Fines and Penalties Government Services and Business Operations
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.
c.
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 Income/Deferred Special
Education Tax Income. Real Property Tax Income/Special Education Tax Income
shall be recognized upon receipt of collection.
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.
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.
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.
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. 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.
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 recognized as a
direct credit to Real Property Tax Income/Special Education Tax Income account.
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. 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.
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 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.
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. 31. Designation of Liquidating Officers. The Treasurer may designate liquidating officers from
among the collectors/tellers whenever necessary.
a.
Sec. 24. Other Receipts. Other receipts of the local government units shall be comprised of, but not
limited to, the following:
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.
c.
The 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.
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 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.
PROCESS
Deposit collections in the appropriate bank account per
authorized depository bank. Records deposit in the
Cashbook Cash in Bank.
Forward RCD to Accounting Unit with copies of ORs and
validated deposit slips.
Treasurer
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
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
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
Check remittances and verifies accountable forms of

collectors/tellers. Consolidates collections and remits to
the Treasurer/Cashier. Prepares RCD.
Liquidating Officer
Receive remitted collections, consolidates the same and

prepares RCD. Records in the Cashbook Cash in
Treasury.
Treasurer
PERSON / UNIT
RESPONSIBLE
Treasurer
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
c. Distribution of Collection
RPT Sharing:
448
101
1,000
100
124
100
Deferred Real Property Tax

Income
Real Property Tax
Due to LGUs
448
711
431
100
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
Municipal - 40%
Province - 35%
Barangay - 25%
d. Deposit of Collections
40
60
100
35
25
Account Title
Acct.
Code
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
Particulars
B.
Debit
Credit
Particulars
Acct.
Code
Debit
Cash in Bank LCCA

Loans Payable Current,
Domestic
Bank Charges
Interest Expenses
Cash in Bank LCCA
110
1,000
403
951
952
110
10
12
Cash in Treasury
domestic
Interest Expenses
Cash in Bank LCCA
101
1,000
403
952
110
Account Title
Credit
Books of the Province

5. BORROWINGS
35
35
b. Receipt of borrowed funds

from other agency -
2. Operating and Service Income

a. Receipt of Income
b. Deposit of Collections
a. Receipt of borrowed funds

from bank Principal - P1,000
Bank Charges - 10
Interest Expense- 12
Cash in Treasury
Receipts from Markets
Garbage Fees
101
783
772
100
Cash in Bank LCCA

Cash in Treasury
110
101
100
90
10
100
Principal P1,000
Interest Expense - 6
c. Payment of loan
amortization

Domestic
Cash in Bank - LCCA
403
110
1,000
22
1,000
6
200
200
3. Share from Internal Revenue Collections

6. SUBSIDIES
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
b. Receipt of Notice of
Funding Check Issued
from the DBM for Share
from Internal Revenue
Collections
Due from NGAs

Share from Internal
Revenue Collections
110
1,000
a. Subsidy from Other Funds (General Fund to Special Education Fund)
746
1,000
GENERAL FUND BOOKS
130
Transfer of subsidy
to
Special Education Fund (Aid
to SEF to finance its
projects)
1,000
746
Subsidy to Other Funds

Cash in Bank LCCA
897
110
500
101
500
500
1,000
SPECIAL EDUCATION FUND BOOKS
Receipt of subsidy funds from
Other funds
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
651
Cash in Treasury Subsidy

from Other
Funds
605
500
100
b. Special Accounts (subsidy from General Fund proper to Operation of Public Market)
800
BOOKS OF GENERAL FUND PROPER

Transfer of subsidy to Special
Account
800
Subsidy to Special
Accounts
Cash in Bank LCCA
898
110
500
500
Particulars
Account Title
Acct.
Code
Debit
Typical transactions for which disbursements are made are as follows:
Credit
1.
2.
3.
4.
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
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
128
10
Cash Disbursing Officers

Cash in Bank LCCA
b. To take up refund of cash

advance
Cash in Treasury
107
110
10
101
10
10
107
10
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)
Cash in Treasury
Performance/ Bidders/
Bail Bonds Payable
101
50
50
Sec. 41. Recording Check Disbursements in the Cashbooks. All checks issued including cancelled
checks shall be recorded chronologically in the Cashbook Cash in Bank.
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
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.
8. RECEIPT OF CASH BONDS

a. To take up receipt of
performance bond in cash
1.
10
b. Cash Advance by a Disbursing Officer for Salaries and Wages

a. To take up the cash
advance
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:
a. Cash Advance by an Officer for Local Travel

a. To take up the cash
advance
Personal Services
Maintenance and Other Operating Expenses
Capital Outlay
Financial Expenses
50
D. DISBURSEMENTS
Sec. 37. Disbursements. Disbursements refer to the settlement of government payables/obligations
by cash or by check.
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
Accounting Unit.
PROCESS
PERSON / UNIT
RESPONSIBLE
a. Gather supporting documents, and

approved ALOBS, prepare DV and forward
to Head of Department.
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 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.
Accounting Unit
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.
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
Prepare Accountants Advice

of Local Check Disbursements and
submit to bank. Return DV, check and
supporting documents to
Cashier/Treasurer.
Accountant
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
Treasurer
i.
Prepare the JEV 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.
Concerned Office
b.
h.
j.
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 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.
10
PROCESS
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.
granted on the face of OR. Record the

refund as credit to cash advance and attach
OR to the Cashbook Cash Advances.
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
Sec. 49. Cash Disbursement Process. Disbursement process for payment of salaries and wages out of
cash advances is as follows:
PROCESS
PERSON / UNIT
RESPONSIBLE
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 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
c)
d)
Check completeness of documents/

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

preparation of checks.
Local Chief Executive
PERSON / UNIT
RESPONSIBLE
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 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.
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 return DV, check and
supporting documents to
Cashier/Treasurer.
Accountant
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.
h)
Encash check and pay claimants. Record

disbursement in Cashbook Cash
Advances.
Treasurer/ Disbursing
Officer
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.
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
Disbursing Officer
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,
11
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
Acct.
Code
Debit
Credit
Particulars
Account Title
2. Replenishment of petty
cash fund during the year
Traveling Expenses
Local
Office Supplies Expenses
Office Equipment
Maintenance
Other Expenses
Cash in Bank LCCA
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).
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
Debit
Credit
Enter obligation in RAAOMO for Office Supplies P2,500, Travelling Expenses P500, Office
Equipment Maintenance P1,000 and Other Expenses of P800.
1. Payment through Cash Advances
1. Grant of cash advance

for payroll
Acct.
Code
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.
107
110
21,000
21,000
801
804
18,000
3,000
805
5,000
3. Liquidation at year end
Traveling Expenses
Local
Petty Cash Fund
410
411
412
2,000
1,500
1,500
107
21,000
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 RAAOPS for P1,500 Life and Retirement Insurance Contributions and
P1,500 PAG-IBIG Contributions.
3. Government share for
life and retirement
insurance and PAG-IBIG
Contributions
Life and Retirement

Insurance
Contributions
PAG-IBIG Contributions
GSIS Payable
PAG-IBIG Payable
Enter obligation in RAAOMO for Travel of P1,000

817
1,500
818
411
412
1,500
1,500
1,500
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
1,000
128
900
b. Petty Cash Fund

For establishment of fund, Enter obligation in RAAOMO as Other Expenses for P6,000
Adjust RAAOMO for refund of cash advance of P100
1. Release of cash advance

for petty cash fund
miscellaneous expenses
3. For amount refunded

where official receipt was
issued
Petty Cash Fund

Cash in Bank LCCA
105
110
6,000
6,000
Cash in Bank LCCA

Employees
110
128
100
100
12
Particulars
Account Title
Acct.
Code
Debit
Credit
2. Payment by Check
Particulars
1. Payment of first billing
for 50% accomplishment
Account Title
Construction in Progress
Roads, Highways and
Bridges
a. Maintenance and Other Operating Expenses

Withholding Taxes
Payable
Cash in Bank LCCA
Enter obligation in RAAOMO for rent P3,000

1. Payment of rent
Rent Expense
Cash in Bank LCCA
841
110
Electricity
Telephone/Telegraph
and Internet
Cash in Bank LCCA
Debit
232
400,000
410
110
Credit
40,000
360,000
3,000
3,000
2. Payment of second
billing 100%
accomplishment
Roads, Highways and
Bridges
232
Enter obligation in RAAOMO for electricity of P1,500 and telephone/internet of P2,000

2. Payment of utilities
(MERALCO and PLDT)
Acct.
Code
835
1,500
837
110
2,000
3,500
3. Remittance of taxes
withheld
400,000
Withholding Taxes
Payable
Cash in Bank LCCA
410
110
Withholding Taxes
Payable
Cash in Bank LCCA
410
110
80,000
243
800,000
40,000
360,000
80,000
Enter obligation in RAAOMO for training and seminar expenses of P1,000

If funded from regular agency income
3. Payment of seminar fee
Training and Seminar

Expenses
Cash in Bank LCCA
833
110
1,000
1,000
4. To take up roads
completed
Public Infrastructure
Construction in
Progress Roads,
Highways and Bridges
b. Financial Expenses
232
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
Enter obligation in RAAOFE for interest expense of P400

2. Interest Expense
Interest Expenses
Cash in Bank LCCA
5. To transfer completed
roads to Registry of Public
Infra- structures at the end
of the year
Government Equity
Public Infrastructures
501
243
800,000
800,000
800,000
Note: Using the JEV for the above transactions, the public infrastructures shall
in the Registry of Public Infrastructures.
952
110
be recorded
400
400
If funded from a loan
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 To record completed
roads
6,000
Roads, Highways and
Bridges
800,000
232
6,000
d. Construction of Roads by Contract Enter obligation in RAAOCO for P800,000 for

construction of road.
243
At year end,upon full

payment of laon
Government Equity
501
243
800,000
800,000
800,000
13
Particulars
Account Title
Acct.
Code
Debit
Credit
Particulars
Account Title
Acct.
Code
e. General Repair/Construction of Building by Administration
f. Acquisition of Land
1. Approval of the project

P1M
Enter obligation in RAAOCO for P2million for purchase of land
No entry
1. Payment made for land

purchased
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
Land
Withholding Taxes
Payable
Cash in Bank LCCA
201
Debit
Credit
2M
410
110
200,000
1.8M
No Entry
Construction Materials
Inventory
Withholding Taxes
Payable
Cash in Bank LCCA
2. Remittance of
withholding tax
156
600,000
410
110
60,000
540,000
Agency Assets
410
110
200,000
200,000
g. Land and Building

Enter obligation in RAAOCO for P600,000 for land and P400,000 for building
230
Construction Materials
Inventory
Withholding taxes
Payable
Cash in Bank LCCA
590,000
156
590,000
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
201
204
410
600,000
400,000
100,000
110
900,000
Enter obligation in RAAOCO for P380,000 for labor

5. Cash advance granted to
Disbursing Officer for
payroll
Cash Disbursing
Officers
Cash in Bank LCCA
6. Liquidation by
Disbursing Officer of paid
payroll
Agency Assets
8. Accomplishment Report
approved by the LCE
107
110
350,000
Withholding Taxes
Payable
Cash in Bank LCCA
410
110
100,000
100,000
350,000
h. Purchase of Inventories
230
Withholding Taxes
Payable
Cash Disbursing
Officers
7. Remittance of
withholding tax
2. Remittance of
withholding tax
380,000
Enter obligation in RAAOMO for purchase of P2,500 worth of spare arts
410
30,000
107
350,000
Withholding Taxes
Payable
Cash in Bank LCCA
410
Buildings
Agency Assets
204
30,000
110
230
1. Payment of delivered
spare parts
30,000
970,000
155
2,500
410
110
250
2,250
i. Enter obligation in RAAOMO for purchase of office supplies

1. Payment of office
supplies delivered
970,000
Spare Parts Inventory

Withholding Taxes
Payable
Cash in Bank LCCA
Office Supplies Inventory

Withholding Taxes
Payable
Cash in Bank LCCA
149
410
110
3,000
300
2,700
14
Particulars
Account Title
Acct.
Code
Debit
Credit
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.
j. Fund Transfers
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
897
110
10,000
30,000
k. Enter obligation in RAAOMO for subsidy to SEF

1. Cash transfer to SEF as
subsidy
Subsidy to Other Funds

Cash in Bank LCCA
10,000
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
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.
5.
6.
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.
Loss of Cash and Property Accountability

Cash Overage
Dishonored Check
Lost/Destroyed/Stale/Obsolete and Fraudulently Encashed Check
Settlement of Suspensions/Disallowances/Charges
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
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.
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.
15
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.
Particulars
2.
3.
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.
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.
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.
Acct.
Code
Debit
Credit
b. Cash Shortage of the Treasurer

To take up cash shortage
A spoiled or stale check shall be marked cancelled on its face and reported as follows:
1.
Account Title

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
To take up relief from

accountability

Employees
Cash Disbursing
Officers
128
50
107
50
Loss of Assets (current

year) or Prior Years
adjustments (prior years)
948
Employees
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
101
Cash in Treasury
Other Specific Income of
LGU
101
50
128
50
4. Cash Overage
To take up cash overage
discovered during cash
examination
50
792
50
Sec. 61. Pro-forma Accounting Entries. The following the are pro-forma accounting entries for
miscellaneous transactions:
5. Dishonored Checks
Particulars
Account Title
Acct.
Code
Debit
Credit
Upon receipt of advice of

dishonored check and
cancellation of Official
Receipt
1. Cash Shortage
a. Cash shortage of the of the Disbursing Officer
To take up cash shortage

Employees
Cash Disbursing
Officers
From payment of real property tax in the current year or prior year
128
107
50
50
Real Property Tax

Receivable
Deferred Real Property
Tax
Income
Due to LGUs
Real Property Tax Income
124
50
448
50
431
30
711
20
16
Particulars
Account Title
Cash in Bank LCCA
Receipt of
refund/settlement
Cash in Treasury
Real Property Tax
Receivable
Acct.
Code
110
Debit
101
50
124
Credit
50
50
Check issued in the current/prior year for replacement
Replacement
110
401
50
Accounts Payable
Cash in Bank LCCA
401
110
50
Acct.
Code
Debit
Credit
c.1 Recording of charges which collection were made in the current year
When the charge becomes
final and executory
Underpayment of Franchise
Tax
Cash in Bank LCCA

Accounts Payable
Account Title
c. Settlement of Charges
6. Lost/Destroyed/Stale/Obsolete Checks
Check cancellation
Particulars
50
Receivables
Disallowances/ Charges
Franchise Tax
138
724
10
101
10
10
Amount Paid - P 100

Should be
- 110
Charge
- 10
50
Settlement
7. Disallowances and Charges
Cash in Treasury
Receivables
138
10
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
Difference
- 10
Settlement of Disallowance
c.2 Recording of charges which collection were made in the prior year
Receivables
Disallowances/
Charges
Office Supplies
Expense
138
When the charge becomes

final and executory
10
Receivables
138
849
533
Cash in Treasury
Receivables
Disallowances/
Charges
101
10
138
Settlement
Cash in Treasury
Receivables
10
8. Refund of Overpayment
When the disallowance

becomes final and executor
a. Overpayment taken up as receivable
Receivables
138
10
Prior Years Adjustments

533
Cash in Treasury
Receivables
Disallowances/
Charges
101
10
To record overpayment of
salaries and wages (When
overpayment is ascertained)
10

Employees
Salaries and Wages
Regular Pay
128
10
10
801
10
10
To record refund of
overpayment
138
101
10
138
b. Recording of disallowance for prior years transaction
Settlement of disallowance
10
10
10
Cash in Treasury
Employees
101
128
10
10
17
Particulars
Account Title
Acct.
Code
Debit
Credit
1. Report of supplies
utilized for P2,000.
Office Supplies Expense

849
2,000
149
2,000
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
101
2.
10
801
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.
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.
b.
Prepayments; and
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).
Particulars
Account Title
1. Receipt of the Notice of

Funding Check Issued for
the December Share from
Internal Revenue
Collections for P20,000.
Due from NGAs

Share from Internal
Revenue Collections
2. Unpaid salaries and

wages of employees, at end
of accounting period,
P50,000.
Salaries and Wages

Regular Pay
Due to Officers &
Employees
Credit
Acct.
Code
Debit
130
20,000
746
801
428
Credit
20,000
50,000
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:
3.
Debit
2,500
Illustrative accounting entries:

Acct.
Code
2,500
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.
1.
Account Title
440
711
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.
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.
Particulars
Deferred Credits to
Income
Real Property Tax
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.
10
533
Application of
advance RPT for
P2,500.
2.
4.
Debit all revenue accounts balances and credit the total to the Income and
Expense Summary account.
Credit all expense accounts balances and cost of goods sold and debit the total to
the Income and Expense Summary account.
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.
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.
18
5.
6.
Debit all credit balances of the intermediate accounts and debit the total to the
Government Equity account.
Credit all debit balances of the intermediate accounts and credit the total to the
Government Equity account.
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.

Particulars
Account Title
1. To close the Revenue

accounts to the Income and
Expense Summary account.
Real Property Tax

Share from Internal
Revenue Collections
Acct.
Code
Debit
711
100
746
10,000
Credit
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:
Business Taxes &

Licenses
Registration Fees
Income and Expense
Summary
2.
To close the
Income and Expense
Summary to Retained
Operating Surplus account.
Income and Expense

Summary
Retained Operating
Surplus
3.
Retained Operating
Surplus
Government Equity
To close the
Retained
Operating
Surplus to
Government
Equity account.
723
761
50
20
532
10,170
Original copy
1 copy
1 copy
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.
532
5,670
534
534
501
5,670
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
current appropriation and for continuing appropriations using the following column headings:
Function/Program/
Project/ Activity
5,670
Appropriations
Allotment
Obligation
Unobligated
Balance
5,670
Chapter 4. TRIAL BALANCE, FINANCIAL REPORTS

AND 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.
COA Unit Auditor

Local Sanggunian
Local Treasurer
Local Accountant
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.
Sec. 69. Procedures in the Preparation of the Trial Balance. The procedures in trial balance
preparation shall be:
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.
b.
c.
Status of Appropriations, Allotments and Obligations;

Subsidiary Schedule of General Ledger account balances; and
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 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
19
of accounts. The following interim financial statements and the Notes to Financial Statements shall be
prepared and submitted quarterly:
a.
b.
c.
Balance Sheet;
Statement of Income and Expenses; and
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.
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
1.
2.
3.
4.
5.
6.
Code
Adjustments
Dr.
Dr.
Cr.
Adjusted
T/B
Dr.
Cr.
Statement of
Income &
Expenses
Dr.
Cr.
Balance
Sheet
Dr.
Cr.
Account title and code columns show the account titles/codes of the general ledger accounts.
Trial balance column reflects amounts obtained from the general ledger balances.
Adjustment columns are the adjustments effected for the prepayments and accruals.
Adjusted trial balance shows the balances of all the accounts after the adjustment at the end
of the accounting period.
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.
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.
b.
c.
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:
Trial Balance
Cr.
The Chief Accountant shall likewise prepare the consolidated financial statements for all funds and the
Notes to the Financial Statements.
Balance Sheet;
Statement of Income and Expenses; and
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;
3.
Customary or routine disclosure which are information about measurement bases of

important assets, restrictions on assets, contingent assets/liabilities, important long term
commitments not recognized in the body of the statements, etc.;
4.
Disclosures of changes in accounting principles- changes in accounting principles, practices

or methods of applying them; and
5.
Disclosures of subsequent events disclosure of events that affect the agency directly and
that occur between the date of, or end of the period covered by, the financial statements
and date of completion of the statements are necessary; if knowledge of the events might
affect the interpretation of the statements, even though the events do not affect the
propriety of the financial statements themselves.
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.
20
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.
(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:
1.
2.
3.
Construction, repair and maintenance of school buildings and other facilities of public elementary
and secondary schools;
Establishment and maintenance of extension classes when necessary; and
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.
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 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)
I.
Particulars
1. Set-up Special education

Tax
Receivable
Account Title
Special Education Tax
Receivable
Deferred Special
Acct.
Code
Debit
125
500,000
Credit
21
I.
Particulars
Total Receivables
P500,000
Provincial Share
P250,000
Account Title
Education Tax
Income
2. Collection of Special
Education Tax P200,000.
Cash in Treasury Special

Education
Tax Receivable
Computation of Shares of
LGUs in RPT 50% of
P200,000 for Provincial
Deferred Special
Education Tax
Income
Share
Due to LGUs
3. Deposit of collections with

authorized depository bank
Cash in Bank LCCA

Cash in Treasury
Acct.
Code
Debit
449
101
500,000
200,000
125
449
I.
Particulars
8. Payment of Salaries
Salaries per Payroll
30,000
Less: Deductions
(Personal Share)
Life & Ret. P 2,850
Pag-ibig
600
Account Title
Salaries and Wages
Regular Pay
Cash Disbursing
Officers
Withholding Taxes
Payable
200,000
100,000
100,000
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
200,000
200,000
Cash in Bank LCCA

4. Remittance of share to
Province ( Special
Education Tax)
P100,000
Due to LGUs (Province)
431
Cash in Bank LCCA
110
5. Receipt of allotment for

Allotment Class:
Personal Services P50,000
MOOE
- 20,000
Capital Outlay
-
Memo entry in Registry

of
Appropriations ,
Allotments and
Obligations (Personal
Services (RAAOPS,
MOOE RAAOMO,
Capital Outlay
RAAOCO)
30,000
Total P100,000
6. Obligation for PS Salaries

of teachers for extension
class P30,000
7. Grant of cash advance for

payroll
100,000
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
PHILHEALTH
Contributions
Cash in Bank LCCA
107
110
Debit
801
30,000
Credit
107
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
100,000
Memo entry in RAAOPS

Cash in Bank LCCA
Acct.
Code
200,000
713
431
110
101
Credit
3,950
25,000
25,000
12. Obligation of Traveling

Expenses P500
Memo entry in RAAOMO
22
I.
Particulars

advance
15. Adjustment of obligation

of travel.
16. Refund of cash advance
17. Deposit of cash refund
Account Title
Acct.
Code
Due from Officers &

Employees
Cash in Bank LCCA
128
110
Traveling Expenses
Local
Due from Officers &
Employees
831
Debit
Credit
I.
500
23. Payment of equipment

with Invoice/Delivery
Receipt
24. Receipt of fund transfer

from General Fund thru bank
500
480
128
Particulars
480
Cash in Treasury
Due from Officers &
Employees
101
Cash in Bank LCCA

Cash in Treasury
110
101
Office Equipment
Withholding Taxes
Payable
Cash in Bank LCCA
222
30,000
Cash in Bank LCCA

Subsidy from Other
Funds
110
410
110
20
128
20
1. Depreciation of
Equipment using the Straight
Line Method:
Equipment :
Life Amount
5 yrs. P6,000
20. Obligation for the

purchase of Office Supplies
P500
21. Payment of office

supplies
835
110
20
Memo entry in RAAOCO
5,000
DepreciationOffice
Equipment
Accumulated
Depreciation
Office Equipment
922
410
110
6,000
322
6,000
Closing Entries :
800
713
100,00
0
Subsidy from Other

Funds
Income and Expense
Summary
605
5,000
532
105,000
800
2. Closing of Expense
Accounts
149
Withholding Taxes
Payable
Cash in Bank LCCA
5,000
20
Accounts
Electricity
Cash in Bank LCCA
Credit
3,000
27,000
605
19. Payment of MERALCO bill

P800
22. Obligation of Equipment

per Purchase Order
P30,000
Debit
Adjusting Entries:
1. Closing of Income
18. Obligation of bill received
from MERALCO
Acct.
Code
Account Title
500
20
480
Income and Expense

Summary
Salaries & Wages
Regular Pay
Life & Retirement
Insurance
Contributions
PHILHEALTH
Contributions
Traveling Expenses
Local
Electricity
DepreciationOffice
Equipment
532
41,230
801
30,000
817
2,850
818
600
819
500
831
835
480
800
922
6,000
23
I.
Particulars
3. Closing of Income and

Expense Summary
Account Title
Income and Expense

Summary
Retained Operating
Surplus
Acct.
Code
Debit
532
63,770
534
Credit
63,770
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.
Sec. 101. Certification and Approval of Disbursements from Trust Funds.
Disbursements from the Trust Fund shall require:
a.
4. Closing of Retained
Operating Surplus
Retained Operating
Surplus
Government Equity
534
501
b.
63,770
63,770
c.
d.
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 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.
Certification and approval of vouchers and payrolls as to validity, propriety

and legality of the claim involved by the department/ office head concerned;
Certification as to existence of funds held in trust and completeness and
propriety of supporting documents by the Accountant;
Certification as to cash availability by the Treasurer; and
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 claim, certify cash availability (Box C)

and forward to approving officer.
Treasurer
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 countersigning officer.
Treasurer
7.
Countersign check and forward to

Accountant for preparation of the
Accountants Advice.
Administrator
8.
Prepare Accountants Advice of Local Check

Disbursements and return DV, check and
supporting documents to Cashier/Treasurer.
Accountant
9.
Issue check to claimant. Record

disbursement in Cashbook Cash in Bank.
Treasurer
24
PROCESS
Prepare Report of Checks Issued (RCI),
forward RCI with DV and supporting
documents to Accounting Unit.
10. Prepare the JEV 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
Accounting Unit
c. Submission of
statement of
disbursements to grantor
11. Forward RCI, DV, supporting documents and

JEV to the Office of the Auditor for final
custody and post audit.
Accountant
d. Issuance of check
with approved DV for
payment to contractor
upon receipt of second
billing 100%
accomplished
Roads,
Highways & Bridges
Withholding Taxes
Payable
Cash in Bank LCCA
e. Transfer of completed
construction to Public
Infrastructure
Roads, Highways &

Bridges
b.
Particulars
Account Title
Acct.
Code
II.
III.
Debit
Credit
No entry
232
1,000,000
410
110
100,000
900,000
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
II.
III.
Debit
Credit
1. Receipt of grant from NGA

a. Receipt of grant direct
to bank from NGA for:
a. Construction of
road P2M
b. Purchas
e of
constru
ction
Equipment P500,000
b. Issuance of check
upon receipt of first
billing 50%
accomplished
Cash in Bank LCCA

Project Equity
502-01 P2,500,000
f. Remittance of taxes
w/held
g. Purchase of
equipment
110
2,500,000
502
232
410
110
Construction and Heavy

Equipment
Withholding Taxes
Payable
Cash in Bank LCCA
1,000,000
232
1,000,000
410
110
200,000
212
500,000
200,000
410
110
50,000
450,000
2,500,000
h. Payment of
withholding tax
Roads, Highways &

Bridges
Withholding Taxes
Payable
Cash in Bank LCCA
Withholding Taxes
Payable
Cash in Bank LCCA
243
1,000,000
100,000
900,000
i. Submission of full
liquidation to grantor
and transfer of
completed road and
equipment to GF for LGU
use
Withholding Taxes
Payable
Cash in Bank LCCA
Project Equity
Equipment
410
110
50,000
502
243
2,500,000
212
50,000
2,000,000
500,000
25
Particulars
Account Title
Acct.
Code
II.
III.
Debit
Credit
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
Equipment
212
500,000
Invested Equity
537
2,500,000
Acct.
Code
II.
III.
Particulars
for Construction of
Building, 50%
accomplished.
Account Title
Withholding Taxes
Payable
Cash in Bank LCCA
Debit
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
803
200,000
410
110
Credit
50,000
450,000
50,000
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
2,500,000
2,000,000
e.
2. Receipt of grant with counterpart fund from LGU

a. Project budget as
agreed upon between
grantor and LGU for
project:
f. Liquidation of Cash
Advances
Grantor
Building 1.2M
Equipment - .3M
LGU Funded
Office supplies -1M
Salaries of project
Personnel - .4M
Total
2M
g.
b.
Receipt of funds
from foreign
funding institution
thru national
government agency
Issuance of check
with approved DV
for cash advance on
salaries and wages
of project
administrative
personnel
Cash in Bank LCCA

Project Equity
502-01 - 1,500,000
502-02 500,000
110
502
Remittance of tax
withheld
2,000,000
Salaries and Wages

Casual/
Contractual
Withholding Taxes
Payable
Cash Disbursing
Officers
Withholding Taxes
Payable
Cash in Bank LCCA
170,000
410
30,000
107
170,000
410
110
30,000
149
110
100,000
849
60,000
30,000
2,000,000
h. Issuance of check
purchase of supplies and
materials

Cash in Bank LCCA
i. Issuance of office
supplies
100,000
Note: Entry in LGU General Fund books shall be

Grants and Donations
Cash in Bank LCCA
889
110
500,000
500,000

149
c. Issuance of check with
approved DV for
Agency Assets
230
500,000
j. Purchase of IT
60,000
IT Equipment and
26
Particulars
equipment
k.
Remittance of
withholding tax
Account Title
Software
Withholding Taxes
Payable
Cash in Bank LCCA
Withholding Taxes
Payable
Cash in Bank LCCA
Acct.
Code
215
II.
III. Debit
250,000
410
110
410
110
Credit
25,000
225,000
Particulars
on salaries and wages
Account Title
Cash in Bank LCCA
r.
Liquidation of
salaries and wages
Salaries and Wages

Casual/Contractual
Withholding Taxes
Payable
Cash Disbursing
Officers
25,000
25,000
s. Remittance of
withholding tax
l. Issuance of check for
installation of equipment
IT Equipment and
Software
Cash in Bank LCCA
215
110
Withholding Taxes
Payable
Cash in Bank LCCA
Acct.
Code
110
II.
III.
803
200,000
Debit
Credit
170,000
410
30,000
107
170,000
410
110
30,000
849
40,000
30,000
50,000
50,000
t. Issuance of office
supplies

End of Year
m.Closing. of expenses to
Project Equity
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
149
Project Equity
502-02 - P260,000
Salaries and Wages
Casual/ Contractual
Office Supplies
Expenses
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
502
803
200,000
849
60,000
230
700,000
410
110
70,000
630,000
Cash Disbursing
Officers
Project Completion
v. Transfer of building
and equipment to the
General Fund as follows:
70,000
70,000
At end of year:
204
107
Project Equity
Salaries and Wages
Casual/
Contractual
502
240,000
803
200,000
849
40,000
Project Equity
Building
IT Equipment and
Software
502
204
1,500,000
Building
IT Equipment and
Software
Invested Equity
204
1,200,000
215
537
300,000
Invested Equity
Government Equity
537
501
1,500,000
1,200,000
215
300,000
1,500,000
1,500,000
1,200,000
230
q.
Issuance of
check for cash advance
End of Year
u. Closing of expenses
to
Project Equity
General Fund Books:

410
110
40,000
260,000
1,200,000
170,000
27
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. 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:
Sec. 106. Objectives for the Maintenance of Special Accounts. Accounting procedures for the
operation of the special accounts are adopted in order to:
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.
a.
b.
c.
Balance Sheet
Statement of Income and Expenses
These reports shall form part of the schedules of the General Fund trial balance.
Sec. 111. Pro-forma Accounting Entries.

Sec. 107. Special Accounts Subsidiary Ledger. Special accounts shall be maintained through the use of
complete subsidiary ledger. In case the local government unit maintains a number of the same
economic enterprise, each shall have its own set of subsidiary ledger (e.g. 8 markets - 8 subsidiary
ledgers for the market).
Sec. 108. Sub-codes for the Special Accounts. The following shall be the sub-codes for the special
accounts:
SPECIAL ACCOUNT
SUB-CODE
General Fund Proper

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
Interests
Bond Issues
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19
20
21
22
23
Transaction
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
Acct.
Code
Debit
110
100,000
746
Credit
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)
(02)
101
148,500
937
6,500
124
65,000
723
50,000
783
40,000
50,000
40,000
c. Requisition of Office Supplies for the following:

Operation of Market
P10,000
Programs under the 20% Dev. Fund
2,000
8,000
No accounting entry
28
Transaction
Acct.
Code
d. Obligation of the requested supplies.
Entry in the RAAOMO
Debit
Credit
g.
Request for procurement of office equipment
of the following offices.
5,000
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

Office Supplies Inventory (01)
8,000
Office Supplies Inventory (02) 10,000
Office Supplies Inventory (18)
2,000
Cash in Bank LCCA
Cash in Bank - LCCA
(01)
7,600
IV.
Cash in Bank - LCCA

Cash in Bank - LCCA
(02)
(18)
Withholding Taxes Payable
Office of the Market Master
149
110
19,000
4,000
Gross
8,800
Withholding Tax
440
Net
1,000
8,360
400
Office Equipment
(01)
4,800
(02)
4,000
(02)
500
(18)
100
Office Equipment
222
f. Report of Utilization of Office Supplies
20% Dev. Fund
Withholding Taxes Payable (01)
240
Withholding Taxes Payable (02)
200
2,000
Cash in Bank LCCA
3,000
Cash in Bank LCCA
(01)
4,560
Cash in Bank LCCA
(02)
3,800
1,000
849
(01)
3,000
(02)
2,000
(18)
1,000

(01)
3,000
(02)
2,000
(18)
1,000
j.
6,000
Obligation of Subsidy to the Operation of the

Market from the GF Proper for P12,000
8,800
410
440
110
8,360
Entry in the RAAOMO
k. Transfer of the funds for P12,000.

149
Entry in the RAAOCO
4,800
Office of the Market Master
Office Equipment
No accounting entry
i. Payment of the procured equipment:
410
Operation of Market
Credit
20,000
1,900
(01)
Debit
4,000
h. Obligation of the requested equipment
9,500
Acct.
Code
Transaction
6,000
Subsidy to Special Accounts
898
12,000
Subsidy to Special Accounts (01) 12,000

Cash in Bank LCCA
Cash in Bank LCCA
110
12,000
(01) 12,000
29
Acct.
Code
Transaction
Debit
Credit
l. Receipt of the transferred funds.

Cash in Bank LCCA
110
12,000
Cash in Bank LCCA
(02) 12,000
Subsidy from Special Accounts
606
12,000
Subsidy from Special Accounts (02) 12,000
Chapter 7. SUPPLIES OR PROPERTY
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.
b.
c.
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.
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.
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. Nonexpendable supplies or property are proper charges to capital outlay of the LGU.
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.
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.
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
Delivery
Receipt/
Invoice No.
RIS No.
Delivery
Receipt/
Invoice No.
RIS No.
Delivery
Receipt/
Invoice No.
Date
Received
Issued
Jan. 1
Jan 12
200 @
P10
400 @
12
4,800
Jan. 16
Jan. 26
500 @
11.33
300 @
11
200 @
11.09
100 @
12
5,665
3,300
Jan. 29
Jan. 30
Balance
1,200
2,218
600 @
11.33
100 @
11.35
400 @
11.09
200
@11.09
300 @
11.39
P2,000
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:
30
(1)
(2)
Requisition Issue Slip (RIS) - for supplies carried in stock; and

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 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.
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.
Sec. 122. Inventory Process. The following is the general process to be followed in the control of
inventory:
PROCESS
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.
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.
b.
Office of the GSO or the Municipal Treasurer or the

office authorized to prepare the same.
The date when the purchase/letter order was received by the supplier or contractor shall be indicated
clearly.
c. Approve ALOBS and the PR.
The Budget Officer and the Chief Accountant, for

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

Acceptance
and
Inspection
Report
(AIR)
and
signs
acceptance portion.
GSO/Local Treasurer
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.
g.
Inspect items, and signs

inspection portion of the AIR.
Property Unit/LGU Inspector
h.
Record delivered items in the

stock/property cards. Prepare
GSO/Local Treasurer
(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.
Prepare ALOBS covering

requisition under the PR.
the
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 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. 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.
31
PROCESS
Disbursement Voucher (DV),
sign box A and forward the same
with
the
delivery
receipt/invoice/
appropriate
documents to Accounting Unit.
i.
j.
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
the entries in the ledger cards
recorded on the basis of the AIR.
Accounting Unit
Prepare
Stock
Availability
Inquiry (SAI) and forward to
Accounting Unit.
Requisitioning Unit
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:
Particulars
k.
Verify
records,
requisitioning unit.
advise
Acct.
Code
Debit
Credit
Accounting Unit
1. Supplies and Materials
1.1 Spare parts -
l.
Prepare Requisition and Issue

Slip (RIS) and forward to
Property /Supply 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
Prepare JEV on the basis of

SSMI, and record withdrawals in
Supply Ledger Cards (SLC).
Accounting Unit
o.
Account Title
Issuance of PR
for spare parts
Record delivery of
items and charge
invoice, if
procurement is on
credit
Payment of
Invoice
If Procurement is
on Cash
Spare
parts worth P50 used
for repairs of motor
vehicles.
(enter Obligation in the

RAAOMO- P100)

Accounts Payable
155
401
100
Accounts Payable
Withholding
Taxes
Payable
Cash in Bank LCCA
401
100

Withholding Taxes
Payable
Cash in Bank LCCA
155
Motor Vehicles
Maintenance
100
410
110
20
80
100
410
110
878
155
20
80
50
50
32
Particulars
Account Title
Acct.
Code
Debit
Credit
Particulars
-
1.2 Office Supplies Issuance

of PR for office
supplies P100.
(Enter obligation in the

RAAOMO-P100)
Record
delivery of items and
charge invoice, if
procurement is on
credit.

Accounts Payable
Payment of
Charge Invoice
If procurement is
on cash basis
Issuance of PR
for Office
Equipment
-P20,000
149
100
401
Accounts Payable
Withholding Taxes
Payable
Cash in Bank LCCA

Withholding Taxes
Payable
Cash in Bank LCCA
Withdrawal of
Office Supplies
for office use.
401
100
410
110
149
(Enter
obligation
RAAOCO-P20,000)
Debit
Credit
in
Office Equipment
Accounts Payable
222
401
20,000
20,000
20,000
Accounts Payable
Withholding Taxes
Payable
Cash in Bank LCCA
401
410
110
2,000
18,000
20
80
2.2 Issuance of PR
for Furniture and
Fixture - P20,000
100
410
110
849
Record charge
invoice and
Delivery of item.
Payment of
delivered
Equipment
100
Acct.
Code
Account Title
20
80
(Enter Obligation
RAAOCO-P20,000)
in
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
100
149
100
410
110
2,000
18,000
1.3 Accountable
Forms Issuance
of PR for accountable
forms
Procurement on
a cash basis
Withdrawal
of office supplies
2. Equipment

RAAOMO P100.00)
Accountable Forms
Inventory
Withholding Taxes
Payable
Cash in Bank LCCA
Accountable Forms
Expenses
Accountable Forms
Inventory
3. Non-Personal Services
3.1 Security Services 148
100
410
110
848
148
20
80
100
Issuance of
contract for
security services P120,000
monthly
P10,000
Receipt of
Billing-
100
Payment of
monthly billing

RAAOMO-P120,000)
Security and Janitorial
Services
Accounts Payable
Accounts Payable
Withholding Taxes
Payable
Cash in Bank LCCA
858
401
10,000
401
10,000
410
110
10,000
1,000
9,000
2.1 Office Equipment
33
Particulars
Account Title
Acct.
Code
Debit
Credit
3.2 Plumbing Services

Signing of contract
for Plumbing
Services
P120,000
Receipt of monthly
billing P10,000
Payment of
Monthly Billing

RAAOMO-P120,000)
General Services
Accounts Payable
Accounts Payable
Withholding Taxes
Payable
Cash in Bank LCCA
857
401
10,000
401
10,000
410
110
10,000
1,000
9,000
34

Accounting For LGUs

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Accounting For LGUs

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THE NEW GOVERNMENT ACCOUNTING SYSTEM MANUAL

Books of Accounts. The Books of Accounts are as follows:

For Local Government Units

Cash Receipts Journal (CRJ)

General Ledger (GL)

Chapter 2. BASIC FEATURES AND POLICIES

10. Financial Statements. The following statements shall be prepared:

Cashbook Cash in Treasury

11. Notes to Financial Statements shall accompany the above statements.

Public utilities and other economic enterprises;

Registry of Appropriations, Allotments and Obligations Capital Outlay (RAAOCO)

Registry of Public Infrastructure Bridges (RPIB)

Chapter 3. ACCOUNTING SYSTEM

Appropriations, Allotments and Obligations

GENERAL ACCOUNTING PLAN (MS Excel file)

Registry of Appropriations, Allotments and Obligations - Capital Outlays (RAAOCO)

Records in the appropriate RAAOs the approved

Office of the Accountant

b) Forwards the advice of allotments to the

Office of the Budget Officer

Office of the Accountant

Enters the allotments in the RAAOs.

d) Prepares ALOBS based on disbursement

e) Certifies the ALOBS as to the existence of

g) Records paid disbursement vouchers in the

Office of the Accountant

h) At the end of each month, reconcile records

Budget Officer and

Investments outlay (e.g. stocks, bonds)

Subsidies (e.g. Subsidy to LGUs, Subsidy to Other Funds, etc.)

C. INCOME/COLLECTIONS AND DEPOSITS

Tax revenues, fees and charges

Subsidy from Other LGUs

Accrual Method Accrual method of accounting

Modified Accrual Modified accrual method of

Prepare Journal of Entry Voucher and record in the Cash

Receive payment from taxpayers/ creditors and issue

Check remittances and verifies accountable forms of

Receive remitted collections, consolidates the same and

Real Property Tax

Deferred Real Property Tax

Cash in Bank LCCA

a. Upon receipt of the

Due from LGUs

b. Upon receipt of share

Cash in Bank LCCA

Cash in Bank LCCA

Books of the Province

b. Receipt of borrowed funds

2. Operating and Service Income

a. Receipt of borrowed funds

Cash in Bank LCCA

Loans Payable Current,

3. Share from Internal Revenue Collections

Cash in Bank LCCA

Due from NGAs

Subsidy to Other Funds

4. Grants and Donations

b. Receipt of grants and

(At the end of Year)

Cash in Treasury Subsidy

BOOKS OF GENERAL FUND PROPER

Typical transactions for which disbursements are made are as follows: