CHAPTER 2

Accrual basis – means a basis of accounting under which transactions and other
events are recognized when they occur (and not only when cash or its equivalent is
received or paid). Therefore, the transactions and events are recognized in the
accounting records and recognized in the financial statements of the periods to which
they relate. The elements recognized under accrual accounting are assets, liabilities,
net assets/equity, revenue, and expenses.

Assets – are resources controlled by an entity as a result of past events, and from
which future economic benefits or service potential are expected to flow to the entity.

Contributions from owners – means future economic benefits or service potential that
have been contributed to the entity by parties external to the entity, other than those
that result in liabilities of the entity, that establish a financial interest in the net
assets/equity of the entity, which: conveys entitlement both to (i) distributions of
future economic benefits or service potential by the entity during its life, such
distributions being at the discretion of the owners or their representatives; and to (ii)
distributions of any excess of assets over liabilities in the event of the entity being
wound up; and/or can be sold, exchanged, transferred, or redeemed.

Distributions to owners – means future economic benefits or service potential

distributed by the entity to all or some of its owners, either as a return on investment
or as a return of investment.

Entity – refers to a government agency, department or operating/field unit. It may be

referred to in this GAM as an agency.

Expenses – are decreases in economic benefits or service potential during the

reporting period in the form of outflows or consumption of assets or incurrence of
liabilities that result in decreases in net assets/equity, other than those relating to
distributions to owners.

Government Accounting – encompasses the processes of analyzing, recording,

classifying, summarizing and communicating all transactions involving the receipt
and disposition of government funds and property, and interpreting the results thereof.
(Sec. 109, Presidential Decree (P.D.) No. 1445)

Government Budget – is the financial plan of a government for a given period, usually for
a fiscal year, which shows what its resources are, and how they will be generated
and used over the fiscal period. The budget is the government's key instrument for promoting its
socio-economic objectives. The government budget also refers to the income, expenditures and
sources of borrowings of the National Government (NG) that are used to achieve national objectives,
strategies and programs.

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

Net assets/equity – is the residual interest in the assets of the entity after deducting all
its liabilities.

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

Revenue funds – comprise all funds derived from the income of any agency of the
government and available for appropriation or expenditure in accordance with law.
(Section 3, P.D. No. 1445)

CHAPTER 3

Allotment – is an authorization issued by the DBM to NGAs to incur obligations for

specified amounts contained in a legislative appropriation in the form of budget
release documents. It is also referred to as Obligational Authority.

Appropriation – is the authorization made by a legislative body to allocate funds for

purposes specified by the legislative or similar authority.

Approved Budget – is the expenditure authority derived from appropriation laws,

government ordinances, and other decisions related to the anticipated revenue or
receipts for the budgetary period. The approved budget consists of the following:

UACS Code
New General Appropriations 01
Continuing Appropriations 02
Supplemental Appropriations 03
Automatic Appropriations 04
Unprogrammed Funds 05
Retained Income/Funds 06
Revolving Funds 07
Trust Receipts 08

Automatic Appropriations – are the authorizations programmed annually or for some

other period prescribed by law, by virtue of outstanding legislation which does not
require periodic action by Congress.

Budget Information – the budgetary information consists of, among others, data on
appropriations or the approved budget, allotments, obligations, revenues and other
receipts, and disbursements.

Continuing Appropriations – are the authorizations to support obligations for a

specific purpose or project, such as multi-year construction projects which require the
incurrence of obligations even beyond the budget year.

Disbursements – are the actual amounts spent or paid out of the budgeted amounts.
Final Budget – is the original budget adjusted for all reserves, carry-over amounts,
transfers, allocations and other authorized legislative or similar authority changes
applicable to the budget period.

15
 New General Appropriations – are annual authorizations for incurring obligations
during a specified budget year, as listed in the GAA.

Obligation – is an act of a duly authorized official which binds the government to the
immediate or eventual payment of a sum of money. Obligation maybe referred to as a
commitment that encompasses possible future liabilities based on current contractual
agreement.

Original Budget – is the initial approved budget for the budget period usually the
General Appropriations Act (GAA). The original budget may include residual
appropriated amounts automatically carried over from prior years by law such as prior
year commitments or possible future liabilities based on a current contractual
agreement.

Revenues – are increases in economic benefits or service potential during the

accounting period in the form of inflows or increases of assets or decreases of
liabilities that result in increases in net assets/equity, other than those relating to
contributions from owners.

Supplemental Appropriations – are additional appropriations authorized by law to

augment the original appropriations which proved to be insufficient for their intended
purpose due to economic, political or social conditions supported by a Certification of
Availability of Funds (CAF) from the BTr.

CHAPTER 4

Responsibility Accounting – provides access to cost and revenue information under

the supervision of a manager having a direct responsibility for its performance. It is a
system that measures the plans (by budgets) and actions (by actual results) of each
responsibility center.

Responsibility Center – is a part, segment, unit or function of a government agency,

headed by a manager, who is accountable for a specified set of activities. Except for
some, which derive most of their income from collection of taxes and fees, NGAs are
basically cost centers which primary purpose is to render service to the public at the
lowest possible cost. Cost centers are established to provide each government
agency’s accessibility to cost information and to facilitate cost monitoring at any
given period.

CHAPTER 5

Bequest – is a transfer made according to the provisions of a deceased person’s will.

The past event giving rise to the control of resources embodying future economic
benefits or service potential for a bequest occurs when the entity has an enforceable
claim, for example on the death of the testator, or the granting of probate, depending
on the laws of the jurisdiction. (Par. 90, PPSAS 23)

Concessionary loans – are loans received by an entity at below market terms.

Exchange transactions – are transactions in which one entity receives assets or

services, or has liabilities extinguished, and directly gives approximately equal value
(primarily in the form of cash, goods, services, or use of assets) to another entity in
exchange. (Par. 11, PPSAS 9)

Fair value – is the amount for which an asset could be exchanged, or a liability settled,
between knowledgeable, willing parties in an arm’s length transaction

Fines – are economic benefits or service potential received or receivable by NGAs,

from an individual or other entity, as determined by a court or other law enforcement
body, as a consequence of the individual or other entity breaching the requirements of
laws or regulations. (Par. 88, PPSAS 23)

Gifts, Donations and Goods In-kind – are voluntary transfers of assets, including cash
or other monetary assets, goods in-kind and services in-kind that one entity makes to
another, normally free from stipulations. The transferor may be an entity or an
individual. For gifts and donations of cash or other monetary assets and goods in-kind,
the past event giving rise to the control of resources embodying future economic
benefits or service potential is normally the receipt of the gift or donation. (Par. 93,
PPSAS 23)

Non-exchange transactions – are transactions in which an entity either receives value

from another entity without directly giving approximately equal value in exchange, or
gives value to another entity without directly receiving approximately equal value in
exchange. (Par. 11, PPSAS 9)

Pledges – are unenforceable undertakings to transfer assets to the recipient entity.

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

33
 Services in-kind – are services provided by individuals to public sector agencies in a
non-exchange transaction.

CHAPTER 6

Accounts Payable – refers to valid and legal obligations of NGAs/OUs, for which,
goods/services/projects have been delivered/rendered/completed and accepted,
regardless of the year when these obligations were incurred.

Advice to Debit Account – refers to an authorization issued by the NGA/OU

appearing in the lower portion of the List of Due and Demandable Accounts Payable-
Advice to Debit Account (LDDAP-ADA). It serves as instruction to the Modified
Disbursement System, Government Servicing Banks (MDS-GSBs) to debit a
specified amount from its available NCA balance under regular MDS sub-account for
payment of creditors/payees through the Expanded Modified Direct Payment Scheme
(ExMDPS).

Agency – refers to any department, bureau or office of the national government, or

any of its branches and instrumentalities, or any political subdivision, as well as any
GOCCs, including its subsidiaries, or other self-governing board or commission of
the government.

Authorized Card Holder – refers to a responsible official to whom a Purchase Card is

issued for purposes of making official purchases within specific categories
enumerated in Annex A of Joint Memorandum No. 2014-01 dated May 15, 2014.

Billing Entity – refers to the accounting unit of the concerned participating agency
responsible in the consolidation of the billing statement from the Credit Card
Company (CCC) and payment of the said billing agency.

Credit Card Company – refers to Citibank as the authorized credit card service
provider for the Cashless Purchase Card (CPC) System.

Commercial Check – refers to a check issued by government agencies chargeable

against the agency’s checking account with AGDBs. These are covered by
income/receipts authorized to be deposited with AGDBs; and funding checks
received by Operating Units from Central/Regional/Division Offices, respectively.

Direct Payment System – refers to the payment procedure whereby the MDS-GSB
shall, upon receipt of NCA an LDDAP-ADA from DBM pay the CCC not earlier than
24 hours but not later than 48 hours, through direct credit to the CCC current account.

61
Disbursements – constitute all cash paid out during a given period in currency (cash)
or by check/ADA. It may also mean the settlement of government
payables/obligations by cash, check or ADA. It shall be covered by DV/Petty Cash
Voucher (PCV)/Payroll.

Expanded Modified Direct Payment Scheme – refers to the payment procedures

whereby the MDS-GSB shall pay the creditors/payees listed in the LDDAP-ADA not
later than 48 hours but not earlier than 24 hours upon receipt of the said document
from the NGA/OU:

Direct credit to the creditor’s current/savings/ATM account (CA/SA/ATM)

maintained with MDS-GSB; or

Bank transfer, if creditor’s account is maintained outside the agency’s MDS-

GSB, where corresponding bank charges shall be borne/paid by the
creditor/payee concerned.

Implementing Agency – refers to the agency to which the funds are transferred for the
purpose of prosecuting/implementing the project.

Inter-Agency Transferred Fund – refers to cash or money transferred to an

Implementing Agency (IA) for the undertaking of a project by a Source Agency (SA)
in which the allotment was released.

Letter of Introduction – refers to a letter addressed to the MDS-GSB, issued by the

NGA/OU to its creditors/payees for the purpose of opening an account or validation
of an existing account.

List of Due and Demandable Accounts Payable-Advice to Debit Account – refers to

an accountable form integrating the Advice to Debit Account (ADA) with the
LDDAP, which is a list reflecting the names of creditors/payees to be paid by the
NGA/OU and the corresponding amounts of the unpaid claims.

Merchants – refers to those authorized by the CCC to be the sellers/suppliers under

the CPC System.

Modified Disbursement System (MDS) Check – refers to a check issued by

government agencies chargeable against the account of the Treasurer of the
Philippines, which are maintained with different MDS AGDBs. MDS checks are
covered by NCA.

Modified Disbursement System, Government Servicing Banks – refers to the

authorized government servicing banks, such as Land Bank of the Philippines (LBP),
Development Bank of the Philippines (DBP), and Philippine Veterans Bank (PVB),
to which DBM issues the NCAs for crediting to the MDS sub-accounts of NGAs.

Petty Cash Fund – refers to the amount granted to duly designated Petty Cash Fund
Custodian for payment of authorized petty or miscellaneous expenses which cannot
be conveniently paid through checks/LDDAP-ADA.

Program Administrator – refers to the designated by the head of the agency who are
tasked to implement and administer the Cashless Purchase Card System.

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Project – refers to the undertaking, whether construction work, research or training
program, computer engagement or other authorized activities which an agency shall
prosecute or implement in favor or in behalf of another agency.

Purchase Limit:

Cardholder Monthly Purchase Limit – refers to the limit established by the

Program Administrator and approved by the Steering Committee for the total
value of purchases that a cardholder can make in one month.

Cardholder Single Purchase Limit – refers to the maximum amount allowed the
cardholder for each transaction.

Maximum Purchase Card Limit – refers to the maximum amount that the
unit/office is authorized to utilize as stated in the Purchase Card application

Regular Cash Advance – refers to the amount granted to cashiers, disbursing officers,
paymasters, and/or other accountable officers for the payment of expenses such as
salaries and wages, commutable allowances, honoraria and other similar payments to
officials and employees.

Steering Committee – refers to the advisory committee composed of representatives from

DND and the DBM which shall provide the guidance on key issues such as policy and
objectives, control, procedures, individual card limits, individuals authorized to use the
cards, amendments, and decisions involving large expenditures.

Special Cash Advance – refers to the amount granted on the explicit authority of the Head
of the Agency only to duly designated disbursing officers or employees for other legally
authorized purposes, such as payment of current operating expenditures, including
salaries, wages and allowances, travel expenditures, and maintenance and other operating
expenses, of the agency field office or for special purpose/time-bound undertaking of the
agency when it is impractical to pay the same by check.

Source Agency – refers to the agency to which the allotment has been originally released
and in whose behalf or benefit the project will be prosecuted/implemented.

Tax Remittance Advice – refers to a serially-numbered document prescribed by the DBM

that should be used by the NGAs in the remittance of withheld taxes on funds coming
from DBM. This form is being distributed by the BIR to be accomplished by the NGAs.
The same shall be duly certified by the Chief Accountant and approved by the Head of
the concerned NGA or his duly authorized representative, and attached to every
withholding tax return filed as payment for taxes withheld. This shall be the basis for the
BIR and the Bureau of the Treasury (BTr) to record the tax collection in their respective
books of accounts. (BIR RR No. 1-2013).

Withdrawal Application – is a written request from the borrower to the development

partner to pay funds against to borrower’s loan account.
CHAPTER 7

Equity instrument – is any contract that evidences a residual interest in the assets of an
entity after deducting all of its liabilities.

Derivative – is a financial instrument that derives its value from the movement in
commodity price, foreign exchange rate and interest rate of an underlying asset or
financial instrument.

Financial instrument – is any contract that gives rise to both a financial asset of one
entity and a financial liability or equity instrument of another entity. (Par. 9, PPSAS 28)

Financial asset – is any asset that is:

Cash;
An equity instrument of another entity;
A contractual right to receive cash or another financial asset from another entity;
A contractual right to exchange financial instruments with another entity under
conditions that are potentially favorable; or
A contract that will or may be settled in the entity’s own equity instruments.

Financial liability – is any liability that is:

A contractual obligation:

To deliver cash or another financial asset to another entity; or

To exchange financial assets or financial liabilities with another entity under
conditions that are potentially unfavorable to the entity.

A contract that will or may be settled in the entity’s own equity instruments.

CHAPTER 19

Accounting Policies – are the specific principles, bases, conventions, rules and practices applied by an
entity in preparing and presenting financial statements. (Par. 7, PPSAS 3)

Cash – comprises cash on hand and cash in bank (held under current and savings account) and cash
treasury accounts.
Cash Equivalents – are short-term, highly liquid investments that are readily convertible to known
amounts of cash and which are subject to an insignificant risk of changes in value. (Par. 8, PPSAS 2)

Cash Flows – are inflows and outflows of cash and cash equivalents. (Par. 8, PPSAS 2)
 Change in accounting estimate – is an adjustment of the carrying amount of an asset or a liability, or
the amount of the periodic consumption of an asset, that results from the assessment of the present status
of, and expected future benefits and obligations associated with, assets and liabilities. Changes in
accounting estimates result from new information or new developments and, accordingly, are not
correction of errors. (Par. 7, PPSAS 3)

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

General Purpose Financial Statements – are those intended to meet the needs of users who are not in
a position to demand reports tailored to meet their particular information needs. (Par. 3, PPSAS 1)

Material omissions or misstatements of items – are material if they could, individually or collectively,
influence the decisions or assessments of users made on the basis of the financial statements. Materiality
depends on the nature or size of the omission or misstatement judged in the surrounding circumstances.
The nature or size of the item, or a combination of both, could be the determining factor. (Par. 7, PPSAS
1)

Notes – contain information in addition to that presented in the Statement of Financial Position,
Statement of Financial Performance, Statement of Changes in Net Assets/Equity, and Statement of Cash
Flows. Notes provide narrative descriptions or disaggregation of items disclosed in those statements and
information about items that do not qualify for recognition in those statements. (Par. 7, PPSAS 1)

Prospective application of a change in accounting policy – means applying the new accounting
policy to transactions, other events and conditions occurring after the date as at which the policy is
changed. (Par. 7, PPSAS 3)

Prospective application of recognizing the effect of a change in an accounting estimate – means

recognizing the effect of the change in the accounting estimate in the current and future periods affected
by the change. (Par. 7, PPSAS 3)

Retrospective application – is applying a new accounting policy to transactions, other events, and
conditions as if that policy had always been applied. (Par. 7, PPSAS 3)

Retrospective restatement – is correcting the recognition, measurement, and disclosure of amounts of

elements of financial statements as if a prior period error had never occurred. (Par. 7, PPSAS 3)
CHAPTER 20

Consolidated Financial Statements – are the financial statements of an economic entity (controlling
entity and controlled entities) presented as those of a single entity.

Controlled Entity – is an entity, including an unincorporated entity such as a partnership, which is

under the control of another entity (known as the controlling entity).

Controlling Entity – is an entity that has one or more controlled entities.

Equity method – is a method of accounting whereby the investment is initially recognized at cost and
adjusted thereafter for the post-acquisition change in the investor’s share of the investee’s net
assets/equity. The investor’s surplus or deficit includes its share of the investee’s surplus or deficit and
the investor’s net assets/equity includes its share of changes in the investee’s net assets/equity that have
not been recognized in the investee’s surplus or deficit.

Minority Interest – is that portion of the surplus or deficit and net assets/equity of a controlled entity
attributable to net assets/equity interests that are not owned, directly or indirectly, through controlled
entities, by the controlling entity.

Separate Financial Statements – are those presented by a controlling entity, an investor in an

associate, or a venturer in a jointly controlled entity, in which the investments are accounted for on the
basis of the direct net assets/equity interest rather than on the basis of the reported results and net assets of
the investees. (Par. 7, PPSAS 6)