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TheNew GovernmentAccounting System

NGAS)

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The Commission on Audit shall haveexclusive authority, subject to limitations, to define

the scope of its audit examination, establish the

techniques and methods required therefore andpromulgate accounting and auditing rules and

regulations, including those for the prevention anddisallowance of irregular, unnecessary, excessive,extravagant, or unconscionable expenditures, or

uses of government funds and properties.Article IX-D, Section 2 Par. 2) of the 1987 Constitution of the

Republic of the Philippines)

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Government AccountingDefined

encompasses the processes ofanalyzing,recording,classifying,summarizing andcommunicating

all transactions involving the receiptand disposition of governmentfunds and property and

interpretingthe results thereof.

(Section 109, PD 1445)JLRecto

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NGAS is a simplified set of accountingconcepts, guidelines and procedures design

to ensure correctness, completeness, andtimeliness in the recording of government

financial transactions, and production of financial reports.

WHAT IS THE NGAS?

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Date of Effectivity of NGAS

January 1, 2002 NationalGovernment Agencies and Local

Government Units

January 1, 2005 GovernmentOwned and/or Controlled

Corporations

January 1, 2007 - Barangays

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Why change the existing system and adop

the NGAS?The old system was about half a century old

and designed for manual operation .

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It is no longer responsive to the current

demands of government financialmanagers.

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It is a complex system that cannot be

readily understood by non-accountantsand other users.

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The NGAS is more in conformity withInternational Accounting Standards.

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It helps government executives in

monitoring the performance of theiragency more effectively.

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ExpendituresRevenues

GrossBorrowings

It enables agencies to generate relevant

and periodic financial statements andother operation reports needed bygovernment planners and other users.

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It leads to eventual computerization.

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1. Simplify government accounting;2. Conform with applicable laws,

COA accounting policies, rulesand regulations and International

Accounting Standards; and

3. Generate periodic and relevantfinancial reports for bettermonitoring of performance.

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Accounting Methoda. Modified Accrual Method

Non-tax revenues shall be under

accrual method of accounting.Income shall be recorded whenrealized/earned regardless ofcollection/cash receipt.

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Income

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b. Cash Basis of accounting shall be used forall other taxes, fees, charges and otherrevenues where accrual method is

impractical.

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Expenses shall be recognizedwhen incurred and reported in

the financial statements in theperiod to which they relate.

Accrual Accounting System

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Expense

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One-Fund ConceptOnly one fund shall be maintained by

all government agencies.Separate Fund Accounting shall be doneonly when specifically required

by lawby a donor agency, orwhen otherwise necessitated

by circumstances. JLRecto

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Asset Method of Accounting Recording disbursements as

assets when expendituresapply to more than oneaccounting period

Recording expenses uponutilization/ consumption

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New Chart of Accounts

Three-digit account numberingsystem

(COA Circular No. 2004-002 dated April 29, 2004)

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Basic Features of the New SystemNew Account Codes

Assets 100-299 Asset Contra Accounts 300-399Liabilities 400-499Equity 500-549

Income 550-679 Tax Revenue National Taxes 550-579 Local Taxes 580-599 General Income Permits and Licenses 600-609 Service Income 610-629 Business Income 630-649 Subsidy Income 650-659

Other Income 660-679

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Basic Features of the New Systemcont.)New Account Codes

AccountsAccount

Code

Gain or Loss Accounts 680-699Expenses 700-999 Personal Services 700-749 Maintenance and Other Operating Expenses 750-969 Financial Expenses 970-999

New Coding Structure

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Trial Balance Balance Sheet Statement of Changes in Equity

Statement of Income and Expenses Cash Flow Statement (Direct Method) Notes to the Financial Statements

Financial Statements and Reports

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Use of two-moneycolumn TrialBalance

Trial Balance

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Separately classifiedfrom MOOE

Financial Expenses

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Valuation of Inventory

Cost of ending and issueditems of inventory ofsupplies and materials shallbe computed using theMoving Average Method.

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Small items of supplies withserviceable life of more thanone year shall be recordedas inventory upon purchaseand as expense uponissuance.

Semi-expendable Supplies

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Construction of Assets

Liability shall be recognizedupon receipt of bills andacceptance by Management of

percentage of completion.

Construction Period TheoryJLRecto

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Construction Period Theory

Expenses such as licensefees, permit fees, taxes and

other expenses related tothe construction of assetsshall be capitalized.

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Depreciation

Use of Straight Line Method

Starts on the following monthafter purchase of Equipmentor completion of Constructed

Asset

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TABLE OF ESTIMATED USEFUL LIFE OF PROPERTY PLANT

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TABLE OF ESTIMATED USEFUL LIFE OF PROPERTY, PLANT AND EQUIPMENT

102030

o Woodo Mixedo Concrete

Buildings those that are predominantly

102040

10

o Land Improvementso Runways/taxiwayso Railwayso Electrification, Power and Energy

Structures

Land Improvements

EstimatedUseful Life(in years)

Property, Plant and Equipment

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10101010107

101010101010

o Machinerieso Agricultural, Fishery and Forestryo Airport Equipment

o Communication Equipmento Construction and Heavy Equipmento Firefighting Equipment and Accessorieso Hospital Equipment

o Medical, Dental and Laboratory Equipmento Military and Police Equipmento Sports Equipmento Technical and Scientific Equipment

o Other Machineries and Equipment

Machineries and Equipment

EstimatedUseful Life(in years)

Property, Plant and Equipment

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Depreciation

Residual value equivalent

to ten (10%) percent

Estimated useful life of PPE

prescribed under COACircular No. 2003-007 datedDecember 11, 2003

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Basic Features of the New System

Adoption of Valuation Accounting onProperty, Plant and Equipment

Old system

To recorddepreciation

none

NGAS

Depreciation-Buildings xxx

Accumulated Depreciation- Buildingsxxx

Acquisition Cost Salvage ValueDepreciation =

Estimated Useful Life

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Reclassification of Assets

Serviceable assets which areno longer used shall be

classified to Other Assets .

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Allowance for Doubtful Accounts

Set up for estimateduncollectible trade receivables

For fair valuation

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Basic Features of the New System

implementation of valuation accounting ontrade receivablesThe determination of bad debts expense is derived frompercentage and aging of accounts receivable as follows:

Age of Accounts Percentage

1 60 days 1%61 - 180 days 2%

181 days 1 year 3%

More than 1 year 5%

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Contingent Accounts

No longer used All financial transactions shallbe recorded using appropriateaccounts

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Recognition of Liability

goods are accepted

services are rendered

At the time -

when supplier/creditorbills are received

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Interest Accrual

Interest income and/orexpenses shall be accrued,whenever practicable and

appropriate

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BorrowingsDirectly credited to theappropriate liability accounts

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Corollary and Negative Entries

Not used in NGAS

Use of appropriate accountsfor acquisition/ disposition ofassets

Correcting entry to adjustthe original entry

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Petty Cash Fund

Maintained under theImprest System

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Foreign Currency Adjustments

Revaluation of Foreign Currencydeposits and outstanding foreignloans

At the closing rate prescribed bythe Bangko Sentral ng Pilipinas(BSP) at balance sheet date

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General Ledger

Subsidiary Ledgers (where applicable)

Ledgers

Cash

Receivables

Inventories

Investments

PPE, CIP

Liabilities

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Accountable Officers shall maintain thefollowing:

Required to be maintained byagencies with complete books

Cash Receipts Record

Cash in Bank RecordCash Disbursements Record

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recording of Allotment and Obligation in

the Registries instead of the GeneralJournal and General Ledger

Policies, Rules and Regulations under NGAS

recording of the receipt of Notice of Cash Allocation (NCA) in the books as Cash andIncome

Old system New systemMemo entry in the

Allocation andUtilization Control

Sheet (AUCS)

Dr. Cr.

Cash-National Treasury, MDS xxx

Subsidy Income from NG xxx

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Features NGAS OGAS

Comparison of NGAS and

OGAS1. System

followedCommercial

AccountingObligation Accounting

Double-entrybookkeeping

Double-entrybookkeeping

ResponsibilityAccounting

FundAccounting

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Features NGAS OGAS


OGAS2. Basis of

Accountingfor Income

Modified Accrual Cash basis for tax, grantsand borrowings, accrualfor operating income,obligation accounting forexpenses anddisbursements

For Expenses Expenses are recognizedwhen incurred.

Expenses wererecognized uponobligation.

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Features NGAS OGAS


OGAS3. Chart of Accounts Uses new chart of

accounts with 3digits

Provides for

responsibilityaccounting

Used standardchart of accounts with6 digits

Did not provide for

responsibilityaccounting

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Features NGAS OGAS


OGAS

4. Trial Balance Trial balance of balances;Uses 2-money column TB

Trial balance of totals andbalances;Used 4-money column TB

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Features NGAS OGAS


OGAS5. Statement of

Income andExpenses

Purchases of PPE aretreated as real account, notpart of SIE

Purchases of PPE werereported as obligations,thus, part of Statement ofOperations

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Features NGAS OGAS


OGAS6c. Depreciation Different method of

depreciationaccounting was used

Depreciation accounting

Uses straight-line method,

Residual value of 10%

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Features NGAS OGAS


OGAS6d. Repairs and

MaintenanceRepairs and maintenancecosts are monitored foreach item of PPE

No monitoring ofindividual repairs andmaintenance costs;

Cost of repairs andmaintenance were lumpedin one account

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Features NGAS OGAS


OGAS6e. Loss of PPE Dropped from the books

only upon receipt of thedecision on the Requestfor Relief fromAccountability from COA

Dropped from the booksupon receipt of the Noticeof Loss

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Features NGAS OGAS


OGAS

7. Petty Cash Fund Treated as a regular cashadvance

Maintained under theImprest Fund System

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Features NGAS OGAS


OGAS8. Inventory

Method forSupplies &Materials

Perpetual Inventory Method Periodic InventoryMethod

Inventory Costing Moving Average Method First-In, First-Out Method

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Features NGAS OGAS


OGASSubsidiary Ledgers Maintenance by the

Accounting Unit for eachitem of inventory

Reorder Point andNo. of Days toConsume

Maintenance ofsubsidiary ledgers notstrictly followed

SLs, if ever maintained, didnot provide for such

information

SLs provide information onthere-order point of inventoryand the number of days toconsume

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Features NGAS OGAS


OGAS9. Public

InfrastructuresNot considered as assetsof agency

Considered assets of theagency

Recorded in the respectiveRegistries upon completion

No Registries weremaintained for publicinfrastructures

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Features NGAS OGAS


OGAS

10. Liabilities Recognized only whengoods are delivered and/orservices rendered or whensuppliers bills are received

Liabilities were recognizedupon obligations

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Features NGAS OGAS


OGAS

11. FinancialExpenses

FE were part of theMOOE

FE are separatelyclassified from MOOE

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Features NGAS OGAS


OGAS

12. Borrowings All borrowings and loans

are recorded direct to theappropriate liabilityaccounts.

Borrowings were taken

up as receipts andcorollary entries weremade to record theliability.

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Features NGAS OGAS


OGAS14. Contingent

AccountCash shortages ordisallowed paymentswere recorded under thecontingent accounts.

Contingent accounts notused

Cash shortages/disallowed payments aredirectly recorded using theappropriate accounts.

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Features NGAS OGAS


OGAS15. Corollary

entriesDoes not use corollaryentries

Used corollaryentries

Acquisition/disposition ofPPE is recorded usingappropriate asset accounts

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Features NGAS OGAS


OGAS16. Negative Journal

entryTotally stopped Used negative journal

entry to effect currentyear corrections

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Features NGAS OGAS


OGAS

17. Adjusting

entries

Deferred and accrued

income and expenses aretaken up at end of period

Deferred and accrued

income and expenseswere not taken up at year-end

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Documents

1 Overview- (1)