•Information of past operations and present conditions will enable the specific laws and regulations, and strict

strict adherence thereto are

evaluation of the performance of an agency from one period to the required.
next.
2. the accounts in the trial balance are presented in the order the
• The results of the evaluation may guide the manager on what course accounts are listed in the standard chart of accounts.
of action to follow in a future operation, or the fund needed for a
project. 3. it is a policy that financial transactions and operations shall be
recorded in accordance with pertinent laws and regulations, and in
• Public officers are accountable for the resources entrusted to them. conformity with generally accepted accounting principles.
The accounting data will show whether or not the agency is achieving
the objectives that have been set. The financial reports will show the TYPES OF GOVERNMENT OFFICES
extent of the agency’s financial and non-financial resources, which 1. National (N) ex. Departments
have useful lives. An evaluation of the information will tell the users of
the information the service potentials of these resources or when 2. Local Government Units (LGUs) – municipalities and barangays
additional resources will be needed.
3. Government Owned/ or Controlled Corporations (GOCCs)
• The accounting data will also show the obligations of the agency and
Ex. Pag-IBIG(HDMF), GSIS, SSS, PPA, PhilHealth
how such obligations have been incurred.
1. discussed and illustrated refers to the accounting system of the
The information should tell its user the source of resources,
National Government
which will meet these obligations.
2. LGU has its own accounting system, which is in accordance with
The information should show an analysis of the inflow of
the provisions of the Local Government Code
resources, especially of financial resources.
3. GOCCs usually adopt the commercial accounting system.
Like the accounting for business entities, government accounting is
also a process of producing information that is useful in making SIMILARITIES BETWEEN GOVERNMENT ACCOUNTING AND
economic decisions. Government accounting, however, places COMMERCIAL ACCOUNTING
greater emphasis on the following:
Both involves the following:
a. Sources and utilization of government funds; and
1. the use of the double-entry bookkeeping system
b. Responsibility, accountability and liability of entities entrusted with
government funds and properties. -entries are based on documents

 The sources of government funds include receipts from taxes -postings are made to the general ledger
and other fees, borrowings, and grants from other 2. preparation of periodic financial reports
governments and international bodies.
 The utilization of government funds includes expenditures on 3. use of fundamental propositions concerning accounting functions
programs, projects, unanticipated losses from calamities and and rules governing accounting practices which are flexible and in a
the like. process of evolution.
PECULIAR IN GOVERNMENT ACCOUNTING -according to accounting and auditing rules and regulations.
1. the nature, content, frequency and distribution of the reports and 4. use of chart of accounts
statements are in compliance with the specific requirements of
Similarities:
1. provisions for depreciation 1. The accounts of an agency shall be kept in such detail as is
necessary to meet the needs of the agency and at the same time be
2. accounts used are those prescribed in a chart of accounts adequate to furnish the information needed by fiscal or control
3. two-money columns trial balance of balances agencies of the government (Sec. 111, P.D. 1445)

4. journals classified as general journal and special journals 2. The highest standards of honesty, objectively and consisting shall
be observed in the keeping of accounts to safeguard against
5. financial reports and statements are prepared based on official inaccurate or misleading information (Sec. lll, P.D. 1445)
accounting records
3. The government accounting system shall be on a double entry
DIFFERENTIATE GOVERNMENT ACCOUNTING AND basis with a general ledger in which all financial transactions are
COMMERCIAL ACCOUNTING recorded. Subsidiary records shall be kept where necessary (Sec.
114, P.D. 1445)
Government Accounting when viewed in terms of the basis of
accounting, the recording of financial transactions and reporting has 4. The charts of accounts for government agencies shall be
slight variation from commercial accounting. prescribed and designed by the Commission on Audit (Sec. 113, P.D.
1445)
The difference lies mainly from:
5. To permit effective budgetary control and to establish uniformity in
1. the intrinsic nature and functions of government operations
financial reports, accounts shall be classified in balanced fund groups.
2. that policies spring from constitutional provisions, statues or The group for each fund shall include all accounts necessary to set
presidential issuances forth its operations and condition. All financial statements shall follow
this classification (Sec. 116, P.D. 1445)
DIFFERENCES: GOVERNMENT ACCOUNTING VS. COMMERCIAL
ACCOUNTING 6. A common terminology and classification shall be used consistently
throughout the budget, the accounts and the financial reports. (Sec.
1. engaged in public services commercial establishments is an 115, P.D. 1445)
economic entity
7. The general accounting system shall include budgetary control
2. primary objective is to control government funds, provide data for accounts for revenues, expenditures and debt. (Sec. 117, P.D. 1445)
management decisions geared towards income measurements aside
from control of company resources and assistance to management 8. Estimated revenues which remain unrealized at the close of the
fiscal year shall not be booked or credited to the unappropriated
3. management is concerned with the economical and effective use of surplus or any other account (Sec. 118, P.D.
its resources management is concerned with maximizing its profit and
optimizing the combinations of its resources. 1445)
9. All lawful expenditures and obligations incurred during the year
shall be taken in the accounts of that year. (Sec. 119, P.D. 1445)
GENERALLY ACCEPTED GOVERNMENT ACCOUNTING
PRINCIPLES The usefulness of accounting is maximized when there exist
some generally accepted concepts regarding the nature and
Each government agency shall record its financial transactions valuation/measurement of assets, liabilities income/revenues and
and operations conformably with generally accepted accounting expenses, and some widely supported standards of disclosure and
principles and in accordance with pertinent laws and regulations. reporting.
(Sec. 112, P.D. 1445.)
 There can only be widespread understanding of and reliance OFFICES CHARGED WITH THE ACCOUNTING RESPONSIBILITY
on accounting statements and reports when they are prepared in
conformity with generally accepted principles. 1. Commission on Audit (COA)

FUNDAMENTAL PRINCIPLES 2. Department of Budget and Management (DBM)

Financial transactions and operations of any government 3. Bureau of Treasury (BTR)

agency shall be governed by the fundamental principles set forth 4. Government Agencies (GAs)
hereunder, to wit:
The responsibility for the accounting of financial transactions is shared
1. No money shall be paid out of any public treasury or depository by these offices.
except in pursuance of an appropriation law or specific statutory
authority. 1. COA – has the exclusive authority to promulgate accounting and
auditing rules and regulations; keeps the general accounts of the
2. Government funds or property shall be spent or used solely for government, supporting vouchers and other documents; and submits
public purposes. to the President and the Congress, within the time fixed by law, an
3. Trust funds shall be available and may be spent only for specific annual financial report of the government, its subdivisions, agencies
purpose for which the trust was created or the fund received. and instrumentalities, including government-owned or controlled
corporations.
4. Fiscal responsibility shall to the greatest extent be shared by all
those exercising authority over the financial affairs, transactions, and 2. DBM – responsible for the formulation and implementation of the
operations of the government agency. national budget with the goal of attaining the nation’s socio-economic
objectives
5. Disbursements or disposition of government funds or property shall
invariably bear the approval of the proper officials. - provides for the delineation of primary responsibilities of
government wide service agencies
6. Claims against government funds shall supported with complete
documentation. - shall be responsible for the design, preparation and approval
of accounting systems of government agencies
7. All laws and regulations applicable to financial transactions shall be
faithfully adhered to. 3. BTR – one of the operating bureaus of the Department of Finance
and is the cash custodian of the government is authorized to:
8. Generally accepted principles and practices of accounting as well
as of sound management and fiscal administration shall be observed, 1. receive and keep national funds, manage and control the
provided that they do not contravene existing laws and regulations. disbursement thereof

ACCOUNTING RESPONSIBILITY 2. maintain accounts of financial transactions of all national

government agencies and instrumentalities.
- emanate from Constitution, law, policies, rules and regulations.
4. Government Agencies – responsible in directly implementing the
Constitution of the Philippines – the fundamental law of the land; projects of, and performing the functions delegated by, the
mandates the keeping of the general accounts of the Government; government.
promulgation of accounting rules, and the submission of reports
covering the financial condition and operation of the Government. Each agency (entity) shall maintain accounting books and
budget registries which are reconciled with the cash records of
the BTr and the budget records of the COA and DBM.
 Government agencies are required by law to have accounting 10. Valuation account shall be used to record the current value of
units/divisions/departments. fixed assets. Fixed assets should be accounted for on the basis of
original cost or the estimated cost if original cost is not available.
Even a barangay (the smallest administrative division in the
Philippines) is required to have an accounting unit, e.g., the barangay 11. In case of conflict between legal requirements and sound
“bookkeeper” accounting practices, the legal requirements shall prevail.
BASIC PRINCIPLES AND PROCEDURES 12. The audit of governmental transactions should be taken up by
independent agency.
The Government Auditing Code of the Philippines prescribes
the following principles and procedures of general applicability to DEFINITION OF TERMS:
government units and agencies:
1. Government (defined from dictionary) n. – the authoritative direction
1. Terminology and classification of accounts should be uniform and of the affairs of men in a community; rule and administration; the form
simple but adequate to satisfy the technical requirements especially by which a community is managed.
for budgeting and financial reporting; hence, the need for a chart of
accounts. 2. Resources – refers to the actual assets of any agency of the
government such as cash, instruments representing or convertible to
2. Data should be organized and classified so as to facilitate prompt money, receivables, lands, buildings, as well as contingent assets
and orderly preparation of financial statements. The double-entry such as estimated revenues applying to the current fiscal period not or
systems of accounting should be followed. accrued or collected and bonds authorized and unissued.
3. Budgetary accounts should be provided as means of checking 3. Government Agency / Agency of the Government or Agency –
management. refers to any department, bureau of office of the national government
or any of its branches and instrumentalities, or any of its political sub-
4. Accrual basis of accounting for revenues and expenditures should division, as well as any government owned or controlled corporation,
be used whenever practicable. including its subsidiaries, or other self-governing board or commission
5. Accounting and reporting should be separate for each fund using all of the government. (P.D. 1445)
accounts necessary to present the results of operations and condition 4. Entity – refers to a government agency, department or
of the fund. Activity account should be used to indicate the activities operating/field unit.
for which the agencies are responsible.
5. Financial Reporting – is the process of preparation, presentation
6. An adequate system of internal checks and control should be and submission of general purposes financial statements and other
provided. reports. The objective of financial reporting is to provide information
7. The accounting system should be organized in a manner which will about the entity that is useful to users for accountability purposes and
facilitate periodic audits. decision-making.

8. The accounts should be centralized under the direction of one SALIENT FEATURES OR BASIC CONCEPT OF GOVERNMENT
officer who will be ACCOUNTING

responsible for maintaining central control and summary accounts and The financial resources of government are very limited, it relies
for preparing the financial reports. primarily on taxes

9. Capital expenditures should be distinguished from current operating collected. The following control measures should be adopted for these
expenses. resources.
1. Fund Accounting – every accounting system must incorporate 3. Notice of Cash Allocation (NCA) – is an authorization granted by
some types of unit the Department of Budget and Management to an agency to disburse
by checks a certain amount within a specific period.
concept. The principal accounting unit is referred to as fund.
- It is a control measure designed to ensure that withdrawals are
2. Obligation Accounting – adopted for all government expenditures. within the cash allocation.
Expenditures are
Concept of Fund
anticipated to determine whether these are within the amount of the
appropriations allotted. as a source – it includes cash and other assets such as
receivables and other current assets
3. Notice of Cash Allocation – This control compliments obligation
accounting. It is designed to ensure that withdrawals are within the - it may also include anticipated revenues from taxes and
cash allocation. other similar type of income
as an independent accounting entity – it has its own assets, liability,
surplus, income and expenditure accounts.
1. Fund – is a sum of money or other resources set aside for the
purpose of carrying out specific activities or attaining certain Creation of Funds
objectives in accordance with special regulations, restrictions or
limitations. Funds are created by the Constitution and by legislative
enactments, which direct that receipts be controlled or collections
Characteristics of fund: generated and accounted for as a special resource to carry out
specific activities or attain certain objectives.
1. constitute an independent fiscal and accounting entity.
A legislative enactment creating a fund does not necessarily
2. each fund has a complete set of self – balancing accounts mean an authorization to spend, although the purpose for which the
consisting of assets, liabilities, equity, revenue and expenses. fund is to be applied may have been specified in the law. There is a
Specific activities or objectives attributable to a fund: need for a law appropriating the fund.

1. set of accounts is self-balancing Classification of Funds

2. the related liabilities are segregated 1. according to purpose

The government has various identifiable activities, each of a.) General Fund – a fund which is generally available for all
which may justify the creation of a separate fund for each. functions of the government.

2. Obligation Accounting – provides for the ceiling or the maximum b.) Special Fund – refers to fund created for a special purpose
extent an agency can commit (obligation incurred) the resources of and to all monies collected or any tax levied and paid out for
the government in the performance of its functions. purpose only pursuant to an appropriation law.

- an agency can operate only within the amount actually released 2. According to the source of income
(allotment released) to it by the DBM, which is within or covered by a.) Revenue funds
the amount approved (appropriations) for its operations by the
legislative body. - Refers to the accounting practices, procedures and b.) Bond and loan funds – refer to fund arising from bond
techniques for recording obligations in the government. floated and loans borrowed by the government for specific
 purposes such as permanent public improvements and for The revenue accruing to the fund is not shared by any other fund or
funding previous bond issues. agency. Cash receipts are deposited in the National Treasury or in
any government depository authorized by law. Cash withdrawal is
- a fund whose financial resources are derived from the limited to the cash balance in the treasury or bank.
proceeds of the sale of bonds.
General Fund Accounting – General Fund is a fund which is
c.) Trust or Fiduciary Fund – refers to funds which have come generally available for all functions of Government. It is composed of
officially into the possession of any agency of the government receipts and revenues which are not by law or by contractual
or of a public officer as trustee, agent, or administrator, or agreement applicable to specific purpose or purpose, and which
which have been received for the fulfilment of some obligation. becomes available for expenditure thru an appropriation law adopting
d.) Depository Fund – comprises funds over which the office the budget.
accountable therefore may retain control of for the lawful The receipts and revenues herein referred to are deposited in
purposes for which it came into his possession. It embraces the National Treasury or in any duly authorized government
monies in any and all depositions. depository, when specifically provide by law. They accrue to the
Depository – means any financial institution lawfully authorized unappropriated surplus of the general fund.
to receive government monies for deposit, including the
National Treasury.
3. According to Ownership
Government Accounting Systems
a.) General Fund – is available for any purpose that the
legislative body may choose. - are developed to satisfy the operating needs of the various
government agencies.
Its resources are composed of all receipt or revenues not
applicable to any specific purpose. It is used to finance the However, there is no single system that applies to all agencies
government’s daily activities. although there are some uniformity in the accounting policies and
methods of reporting.
DEFINITION OF TERMS:
Fund Accounting
1. Government Funds – includes public monies of every sort and
1. Special Fund Accounting other resources pertaining to any agency of the government, [which
2. General Fund Accounting refers to any department, bureau, or office of the government.

Special Fund Accounting – the accounting operation is simple. The 2. Government Budget – is a plan for financing the government
use of reciprocal accounts is limited. The consolidation of information activities of a fiscal year prepared and submitted by responsible
similar to branch accounting. Its resources are administered by one executive to a representative body whose approval and authorization
agency. One complete set of books of accounts is kept and are necessary before the plan can be executed.
maintained for a special fund. Financial statements are reports Responsibility, Accountability and Liability over Government Funds
affecting the financial condition and results of operation of the fund is and Property
prepared and submitted in accordance with laws, rules and
regulations. Responsibility over Government Funds and Property
1. Government resources shall be utilized efficiently and effectively in
accordance with the law. The head of a government agency is directly
responsible in implementing this policy and is primarily responsible for
government resources entrusted to his agency. Those who are MODULE 2 – OVERVIEW OF GOVERNMENT BUDGETING
entrusted with the possession of government resources are directly
responsible to the head of the agency. BUDGETING
2. All those who are exercising authority over a government agency BASIC PURPOSE OF BUDGETING
shall share fiscal responsibility.
1. planning
(State Audit Code of the Philippines, P.D. No. 1445)
2. controlling
Accountability over Government Funds and Property
- basis of orderly management of public finances
1. A government officer entrusted with the possession of government
Linkages between government budgeting and state accounting
resources is responsible for the safekeeping therefor in accordance
with the law. Every accountable officer shall be properly bounded. A close linkage exists between government budgeting and
state accounting:
2. The transfer of government funds from one officer to another shall,
except as allowed by law, be made only after the authorization of the Accounting system – provides essential information needed to
COA. The transfer shall be property documented in an invoice and make resources allocation decisions, monitor budgetary performance,
receipt. and asses the effectiveness of operatives.
Liability over Government Funds and Property Budget – provides the framework within which transactions
should be recorded, classified and summarized in the accounting
1. The unlawful use of government resources shall be the personal
system to permit comparison of actual results with budgeted
liability of the employee found to be directly responsible therefor.
standards.
2. Every accountable officer shall be liable for all losses resulting from
Advantages of Budgeting:
the unlawful use or negligence in the safekeeping of government
resources. 1. Action is based on study
3. No accountable officer shall be relieved from liability merely - due to the fact that executives and operating heads make the plans
because he has acted under the direction of a superior officer in which they are bound to execute when approved, careful study will
unlawfully utilizing the government resources entrusted to him, unless become a habit before any action is taken.
before the act, he has notified the superior officer, in writing, that the
utilization is illegal. The superior officer shall be primarily liable while 2. Cooperation is secured in the entire organization
the accountable officer who fails to serve the required notice shall be - operating heads and all those who have something to do with
secondarily liable. operations are supposed to assist in the formulation of the best
4. An accountable officer shall immediately notify the COA for any operating plans for the organization. As such, the result of their work
loss of government funds from unforeseen events (force majeure) represents the judgement of the entire organization.
within 30 days. Failure to do so will not relieve the officer of liability. 3. Policies are established
(P.D. No. 1445)
 - policies are declared in the budget in that emphasis is given on the -It provides the means for controlling the estimate accounts to be
essentiality of projects to be undertaken. A system of priorities is often raised as well as the proposed amounts to be spent for specified
established especially where there are limited resources. objects.
4. Programs or activities are related to expected or available -The financial plan of the government.
resources and economic conditions.
-It has been regarded as a system of policy-making decisions for the
- the economy of the nation as a whole is considered in budgeting of allocation of scarce financial resources among competing needs, a
public expenditures. Government spending may be contracted or system by which policies are implemented and for which execution
expanded depending on the needs of the economy. controls, both administrative and legislative, are established.
5. Balanced programs are developed -It is a program that guides all activities relating to collections and
expenditures. It is the framework of the accounts by which the
- the priority and essentially of projects are studied to the end in view transactions affecting such collections and expenditures shall be
of determining how should be spend and what is to be expected in the recorded.
prosecution of chosen projects or actions.
-Thus, the proper classification of income and expenditures should be
6. Coordinated effort is attained reflected in the accounts so that the recorded data may give adequate
- in budgeting, coordination of all departments or division is support to future budget estimates.
necessary for without it concerted action cannot be attained. NATIONAL BUDGET SYSTEM
7. Operations are controlled -Consists of the methods and practices of the government for
- control of expenditures and operations is provided in systematic planning, programming and budgeting.
budgeting -It shall include the adoption of sound economic and fiscal policies
8. Weakness in the organization are revealed and the political, economic and social objectives

- in the execution of plans, responsibilities are delegated. One will not -Its primary concern is the availability and use of money to provide the
accept responsibility unless authority is delineated. Where plans are services required or expected from the government.
developed and responsibilities for the accomplishment are delegated, LEGAL BASIS OF THE BUDGET SYSTEM
weakness, if any, in the
The legal basis of the current national budget system is the
organization will be revealed. Budget Reform Decree or PD no. 1177. The first premise of the BR
9. Waste is prevented Decree is that the national budget is an instrument for development,
execution and accountability.
- because budgeting analyses the reasons for proposed expenditures
in advance, waste is prevented. PRINCIPAL OBJECTIVES OF THE CURRENT BUDGET SYSTEM

BUDGET AS A FRAMEWORK OF THE ACCOUNTS 1. to carry on all government activities under a comprehensive fiscal
plan developed, authorized and executed in accordance with the
BUDGET – is an estimate of proposed expenditures for specified constitution, prevailing statutes and principles of sound public
purpose and period, and embodies the means of financing them management.
during the same period.
2. to provide for a periodic review and disclosure of the budgetary
status of the government in such detail that officials entrusted by law
with the responsibility of managing the fiscal affairs of the government Government revenues are not enough to provide for the
can determine the adequacy of the financial position of the operation of the government. Government has to borrow for it to
government. deliver basic services our people and the industries require. However,
relying only on local borrowings to augment the requirement of the
government will have a negative effect on the economy.
If the government takes too large a share of domestic
resources, local private demand will have less for their own projects
and activities. As a result, credit will be tight, interest charges will be
OVERVIEW OF THE BUDGET PROCESS high, and prices of goods and services will go up.
What is a national budget? FORMS AND CONTENTS OF THE NATIONAL BUDGET
A national budget is the government’s estimate of its income - The budget proposal to the President shall include current operating
and expenditure for a given period. It is based on what the expenditures and capital outlays.
government plans to spend in its programs and projects in relation to
the income it projected to have to be sourced from internal revenues, - it shall comprise such funds as maybe necessary for the operation
local and foreign borrowings and other sources such as shares from of the programs, projects and activities of the various departments
the income of government owned and controlled corporations. and agencies.

The National Budget -The proposed General Appropriation Act and other Appropriation
Acts necessary to cover the budget proposals shall be submitted to
Government – accounting is primarily budgetary accounting. Congress to accompany the President’s budget submission.
Government accounting does not only aim to provide information on
past events and transactions but also budget information in - The budget shall be presented to Congress in such form and content
accordance with PPSAS 24. as may be approved by the President.

The Philippine Constitution and other laws require government SYSTEMS IN THE GOVERNMENT
funds to be utilized in accordance with a national budget that is duly BUDGETING – is performed on a basis consistent with revenue and
approved by legislation. Government accounting, therefore, is appropriation systems.
concerned with providing information useful in assessing the
conformance of utilizations of government funds with the approved 1. Revenue system – provides fundamentally for the collection and
budget. custody of government funds. It consists fundamentally of the
collection by designated agencies of taxes and other revenues
The national budget (government budget) is the government’s determined in accordance with law and placing of collections in the
estimate of the sources and uses of government funds within a fiscal Treasury until such time that the congress / senate authorized their
year. This forms the basis for expenditures and is the government’s use.
key instrument for promoting it socio-economic objectives.
2. Appropriation system – provides for the control and ultimate
NATIONAL BUDGET, defined disbursement of funds collected. It consists of:
A statement of the estimated receipts based on existing and proposed 2.1 An authorization by the Congress to use government revenues for
revenue measures and of expenditures which serves as the basis of designated purposes.
the general appropriation bill.
2.2 The release of accounts by the Department of Budget and
Why does government borrow from foreign sources? Management to the agencies which will carry out the actual work.
2.3 The incurrence by the agencies pursuant to their allotments of Main Objectives of a System of Budget Execution:
financial obligations during the course of their work program.
1. preserving legislative unit
2.4 The payment by the Treasury from revenues in its custody of
warrants drawn on the treasury to pay legitimately incurred financial 2. observing financial limitations
obligations. 3. maintaining flexibility in governmental operations
This process serves management as the medium through
The Budget Process which plans for operation can be developed and the feasibility and
soundness of specific proposals tested against approved programs
The formulation and eventual utilization of the national budget and policies, desirable targets and goals and available resources and
are summarized in the budget cycle. funds.
The Budget Cycle
The budget cycle has four phases, namely:
1. Budget Preparation
2. Budget Legislation
3. Budget Execution
4. Budget Accountability
PHASES / STAGES OF BUDGETARY PROCEDURES
1. Preparation and Presentation – this phase covers the estimation,
determination and translation of government revenues, priorities and
activities. Under this phase, government agencies prepare their
budgets to be submitted to the Department of Budget and
Management for review. The DBM them consolidates all budgets to
form a government wide budget estimate. This shall be submitted to
the President for final approval.
2. Budget Authorization – this phase involves the submission of the
national government budget to the legislative body for review, and the
formulation of an appropriation bill to be forwarded to the President for
approval.
3. Budget Execution or Operation – this phase covers the
implementation of the various operational aspects of the budget, such
as the release of allotment to the various agencies, the continuing
review of government fiscal position, and other related activities.
DBM – is primarily responsible for monitoring budget execution