Govt Acctg Ch9a Acctg for Lgus

7/28/2019 Govt Acctg Ch9a Acctg for Lgus

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A modified accrual method shall be used

where expenses shall be recognized whenincurred and income shall be in accrual basisexcept for the transactions where accrual basisis impractical or when other methods may be

require by law.



Separate fund accounting shall be done only

when specifically required by law or by adonor agency or otherwise necessitated bycircumstances subject to prior approval of theCommission.



-Special accounts maintained in the General Fundshall be supported by subsidiary ledgers for thefollowing:

a. Public utilities and other economic enterprises;

b. Loans, interest, bond issued and othercontribution for specific purpose;

c.

Development projects funded from the share inInternational Revenue collection; and

d. Other special accounts, which may be created bylaw or ordinance



A new coding structure and a new chart ofaccounts with three-digit account numberingsystem shall be adopted.



Journals Cash Receipt Journal

(CRL) Cash Disbursement

Journal (CDJ)

Check Disbursement Journal (CkDJ) General Journal

Ledgers General Ledgers Subsidiary Ledgers

-Cash-Receivables

-Inventories-Investments- PPE-Liabilities

-Income-Expenses



In addition to the preceding records, thetreasurers and disbursing officers, however,

shall maintain their respective cash recordssuch as:

1) Cash Book- Cash in Treasury

2) Cash Book- Cash in Bank

3) Cash Book- Cash Advances

The Treasurers/Collectors shall prepare the

Report of Collections and Deposits (RCD)daily and the Report of Accountability forAccountable Forms (RAAF) monthly.



The local Government Units shall prepare thefinancial statements such as:

1. Balance Sheet

2. Statements of Income and Expenses

3. Statement of cash Flows

Notes to Financial Statements, being integralpart of the financial statements shallaccompany the above statements



Journal entry shall no longer be prepared to record theappropriations, receipt of allotments and incurrence ofobligations. In lieu of this, separate registries shall bemaintained by the accounting unit to control theappropriations, allotments and obligations for each of

the classes of expenditure namely: Registry of Appropriations, Allotments and Obligations

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

– Maintenance and other Expenses (RAAOMO) Registry of Appropriations, Allotments and Obligations

– Personal Services (RAAOPS) Registry of Appropriations, Allotments and Obligations

– Financial Expenses (RAAFE)



Under new accounting system financialexpenses such as bank charges, interestexpenses, commitment fees and other related

expenses shall no longer be classified asmaintenance and other operating expenses.



It shall be recorded using the perpetualinventory system. Regular purchases shall becoursed through the inventory account and

issuance thereof shall be recorded as thetransactions take place, except those purchasedout of petty cash fund, which shall be forimmediate use shall be charged to expense

account.



However, there are tangibles account withserviceable life of more than one year but

small enough to be considered as PPE. Toaddress this issue, the Commission prescribedthe following policies:

Small tangible items with estimated useful

life of more than one year shall be recordedas Inventories upon acquisition and expenseupon issuance

Other tangible assets not included in the listshall be classified as PPE subject todepreciation



Inventories shall be valued at cost andcomputed using the moving average methodwhich is a method of calculating the value of

inventory based on weighted average on thedate of issue.



The accounting unit shall maintain SuppliesLedger Cards by stock number and Plant,Property and Equipment Ledger cards bycategory of Assets



The construction period theory shall be appliedfor costing purposes. Bonus paid to the contractorfor early completion of work shall be added to

the cost of project. Liquidated damages chargedand paid for the contractor shall be deductedfrom the cost of the asset and not as an income.Any related expenditures incurred during the

construction period shall be capitalized.



Registry of Public Infrastructures (RPI) shall bemaintained according to classifications. These are thefollowing:

Registry of Public Infrastructures- Bridges

Registry of Public Infrastructures- RoadsRegistry of Public Infrastructures- Plazas etc

While under the construction, these infrastructuresshall be recorded under the “Construction in Progress”

account. Upon completion, it shall be recorded as “Public Infrastructures” and shall be transferred to the respectiveregistry at the end of the year. However, completed PublicInfrastructures funded out of loan shall be retained in thebooks of accounts until the loan is fully paid.



Depreciable assets shall be depreciated usingthe straight line method. A residual value equal to10% of its cost shall be maintained. Depreciation

shall start on the second month after the purchaseor completion of the property, plant andequipment. Public Infrastructures shall not becharged any depreciation.



Assets declared by proper authorities asobsolete and unserviceable, including assets no

longer used, shall be reclassified as “Other Assets” separate from inventory and plant,property and equipment account



In order to have fair valuation of receivables,allowance for doubtful accounts shall be

established and shall be provided only for tradereceivables.



Contingent accounts shall no longer used. Allfinancial transactions shall be recorded using the

appropriate accounts. Cash shortages anddisallowance shall be recorded under receivableaccounts.



Liability shall be recognized at the time goodsand services are accepted or rendered and

supplier/creditor bills are received.



Whenever applicable and appropriate, interestincome and/or expenses shall be accrued and

recognized in the books of accounts.



All borrowings and loans incurred shall be

recorded directly to the appropriate liabilityaccounts.



Corollary entries and negative entries shall nolonger be used. Acquisition/Disposition of Assets

shall be debited or credited directly to theappropriate asset accounts.



The local government budget primarily consist oftwo parts:

1. The estimates of income certified collectible bythe treasurer; and

2. The total appropriations covering the current

operating expenditures and the capitaloutlays.





The local treasurer shall submit to their local chiefexecutive a certified statement covering the income andexpenditure pertaining to the preceding fiscal year; theactual income and expenditures of the first three quartersand the estimated income for the ensuing year. The localtreasurer also certifies to the reasonable probability ofrealizing the estimates of income for the issuing year.

On the hand, each head of office shall submit astatement of the proposed expenditures recommended byhim for his office of the local chief executive.

Upon receipt of the statements of income andexpenditures and the budget proposals, the local chiefexecutive prepares the budget for the issuing year andsubmits the same to the local council on or before thedeadline set for the submission of the budget.



On or before the end of the fiscal year, thelocal council approves through the enactment ofan appropriate ordinance, the annual budget for

each fund of the local government on the basis ofthe statement of certified estimated income andbudget proposals submitted by the local chiefexecutive. The approval by the council of local

government unit requires the affirmative votes ofthe majority of all members thereof.



As the chief financial officer, the treasure ofthe local government unit shall provide technicalin the staff services in execution and

accountability phases of the budget process. Theprojects and activities under each program areperformed and pursued in accordance with thefunctions of the government unit to realize

expected results.



Changes in the annual budget may be madewithin the fiscal year by the way of thesupplemental budget, which is enacted in the

same manner as the annual budget. Wheneverany change is made in the budget, thesupplemental appropriation ordinance clearlyindicates the various items of appropriations

effected and the reason for change.



Whenever the local legislative body fails to passthe annual budget before the beginning of the ensuingfiscal year or when the enacted budget is declaredunenforceable by the reviewing officer, the annual

appropriations for salaries and wages of existingpositions, statutory and contractual obligations andessential operating expenses authorized in the annualbudget are deemed re-enacted. The disbursements offunds is in accordance with said preceding yearbudgets until a new budget or revised budgetmeeting the objections of reviewing officer isapproved.



In the implementation of a re-acted budget,the local treasurer excludes from the estimates ofincome for the preceding year those realized from

non-recurring sources should be revised incomeestimates be less than the aggregate re-enactedappropriations, the treasure shall advise the localcouncil and the legislative body shall make the

necessary adjustments within 10 days from thereceipt of such advice.



The fundamental state accounting principlesand procedures used in recording the financialtransactions and operations of the local governmentunit is the same to the national governmentaccounting.

Accounting is one of the principal devicesthrough which control of budget execution isexercised. The estimated revenues, receipts andappropriations, in the amount approved by the local

legislative body and confirmed by the reviewingofficers, are recorded in the books, where these arecompared with the actual developments during theperiod.



1. Appropriations- it refers to the authorizationmade by ordinance, directing the payment ofgoods and services fro the local government

funds under specified conditions or forspecific purposes.

2. Allotments- is the authorization issued by thelocal chief executive to the local government

unit, which allows it to incur obligations frospecified amounts within the appropriation ofthe ordinance.

3. Obligations- it refers to the amounts

committed to be paid by the government unitfor any lawful act made by an accountableofficer for and in behalf of the localgovernment unit concerned.

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Govt Acctg Ch9a Acctg for Lgus