PA310 Public Accounting and Budgeting Module AY24-25 PDF

PA310: Public Accounting and Budgeting Module AY24-25 CHAPTER 5 REVENUES AND OTHER RECEIPTS Introduction Revenue - is the gross inflow of economic benefits or service potential during the reporting period when those inflows result in an increase in equity, other than increases relating to contributions from owners. Revenue includes only those that are received or receivable by the entity in its own account. Receipts refer to actual cash collections from all sources during a period. Fundamental Principles for Revenue А. All revenues of an entity shall be remitted to the National Treasury and included in the General Fund of the National Government, unless another law specifically allows otherwise. B. All moneys and property received by a public officer, acting in any capacity or upon any occasion, shall be accounted for as government funds and government property, unless another law specifically states otherwise. C. Amounts received in trust and from business-type activities of the government may be separately recorded and disbursed in accordance with relevant rules. d. Receipts shall be recorded as revenue of Special, Fiduciary or Trust Funds, or Funds other than the General Fund only when authorized by law. e. A collecting officer shall immediately issue an official receipt (OR) upon collecting a payment of any nature. F. Where mechanical devices (e.g. electronic official receipt) are used to acknowledge cash receipts, the COA may approve, upon request, the exemption from the use of accountable forms. g. Temporary receipts shall never be used to acknowledge the receipt of public funds. h. Pre-numbered official receipts (ORs) shall be issued strictly. numerical sequence. Duplicate copies shall be the exact copies of the original. I. A collecting officer shall accept payments to the government, in the form of checks, upon proper endorsement and identification of the payee or endorsee. The collecting officer shall not use government funds to encash private checks. j. Receipts of government funds shall be acknowledged in accordance with the law - indicating the date of receipt, from whom and on what account the fund was received. (P.D. No. 1445 & Chapter 2, Sec. 4 of GAM for NGAs) Types of funds General fund - a fund which is available for any purpose other than those which other funds have been designated to. Special fund - a fund designated for special purposes. Trust fund (Fiduciary fund) - fund held by a government agency or public officer acting as trustee, agent, administrator for the fulfillment of a condition. Revenue fund - comprises all funds derived from the income of any government agency and available for appropriation or expenditure in accordance with the law. Depository fund - fund held in an authorized depository bank over which the recipient agency retains control for the lawful purposes for which the fund was received Special Account in the General Fund (SAGF) - established to facilitate the funding of priority activities of the government. The SAGF is sourced from specific fees, grants and donations, and other sources identified under the law. The following are relevant legal provisions regarding the SAGF a. All income and collections for Special and Fiduciary Funds shall be remitted to the Treasury and treated as SAGF. b. The SAGF shall be considered as being automatically appropriated for purposes authorized by law, except when the General Appropriations Act (GA) provides otherwise. c. SAGF shall be released to government agencies subject to the approval of the President. Special Purpose Funds (SPFs) - are "funds that the President allocates for special programs and projects. Unlike for other funds, SPFs are not under the accountability of any particular government agency/office or unit." (2012 Annual Financial Report of the Republic of the Philippines) Relevant provision of law: All money collected on any tax levied for a special purpose shall be treated as a special fund and paid out for such purpose only. If the purpose for which a special fund was created has been fulfilled or abandoned, the balance, if any, shall be transferred to the general funds of the Government. (Art. VI, Sec. 29(3). Philippine Constitution) Sources of Revenue Revenues may arise from exchange and non-exchange transactions. a. Exchange transactions (Reciprocal transfers) - are transactions. in which one entity receives assets or services, or has liabilities extinguished, and directly gives approximately equal value to another entity in exchange. (PPSAS 9.11) Examples: sale of goods and rendering of services. b. Non-exchange transactions (Non-reciprocal transfers) - 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. (PPSAS 9.11) Examples: tax revenue, fines and penalties and donations. When the consideration transferred does not approximate the fair value of the resources received, the entity determines whether the transaction includes a combination of exchange and non-exchange transactions. Each component shall be recognized separately. (PPSAS 23.10) If it is not immediately clear whether a transaction is an exchange or non-exchange transaction, the substance of the transaction shall be examined to determine its type. For example, the sale of goods is normally an exchange transaction. However, if the transaction price is subsidized, the transaction falls within the definition of a non-exchange transaction. The receipt of trade discounts, quantity discounts, or other reductions in price does not necessarily mean that the transaction is a non-exchange transaction. (PPSAS 23.11) Exchange Transactions Revenues from exchange transactions arise from the following: I. Sale of Goods or Provisions of Services to third parties or other government entities. Examples: a. Service Income - Permit Fees, Registration Fees, Franchising Fees, Licensing Fees, Legal Fees, Passport and Visa Fees, Processing Fees, and the like. b. Business Income - School Fees, Examination Fees, Rent/Lease Income, Communication Network Fee, Income from Hostels/Dormitories, Sales Revenue, Hospital Fees, Share in the Profit of Joint Venture, and the like. II. Use by other entity of assets yielding interest, royalties and dividends or similar distributions. Examples: a. Interest income - charges for the use of cash or cash equivalents, or amounts due to the entity; b. Royalties - fees paid for the use of the entity's assets such as trademarks, patents, software, and copyrights; and c. Dividends - share of the National Government from the earnings of its capital/equity investments in Government-Owned or Controlled Corporations (GOCCs) and other entities. Recognition of Revenue from Exchange Transactions. Sale of Goods: Revenue from the sale of goods shall be recognized when all of the following conditions are satisfied: i. Significant risks and rewards of ownership of the goods are transferred to the buyer; ii. The entity does not retain continuing managerial involvement or effective control over the goods sold; iii. It is probable that economic benefits will flow to the entity; iv. Revenue can be measured reliably; and v. Costs relating to the transaction can be measured reliably. Rendering of Services: Revenue from the supply of services is recognized on a straight line basis over the period the services are rendered. However, revenue is recognized by reference to the stage of completion (e.g., percentage of completion method) if the outcome of the transaction can be estimated reliably, such as when all of the following conditions are satisfied: 1. The stage of completion of the transaction at the reporting date can be measured reliably; 2. It is probable that economic benefits will flow to the entity; 3. Revenue can be measured reliably; and 4. Costs relating to the transaction can be measured reliably. For practical purposes, when services are performed by an indeterminate number of acts over a specified time frame, revenue is recognized on a straight line basis over the specified time frame unless there is evidence that some other method better represents the stage of completion. (PPSAS 9.24) When the outcome of the transaction involving the rendering of services cannot be estimated reliably, revenue is recognized only to the extent of the expenses recognized that are recoverable. (PPSAS 9.25) Interest, Royalties & Dividends a. Interest is recognized on a time proportion basis that takes into account the effective yield on the asset; b. Royalties are recognized as they are earned in accordance with the substance of the relevant agreement; and c. Dividends are recognized when the entity's right to receive payment is established. A government entity normally recognizes revenue from service income when the services are rendered, except when this is not practicable, in which case, revenue is recognized when fees are collected. Similarly, revenue from business income (except sale of goods) is recognized when fees are billed, or if not practicable, when fees are collected. (GAM for NGAs, Chapter 5, Sec. 7) Measurement of Revenue from Exchange Transactions Revenue from exchange transactions are measured at the fair value of the consideration received or receivable. Any trade discounts and volume rebates shall be taken into account. 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 Example: Entity A sells goods with a list price of P10,000, on account, with the following credit term 10%, 10%, and 5%. Revenue is recognized as follows: When cash flows are deferred, the fair value of the consideration may be less than its nominal amount. In this case, the fair value of the consideration receivable is determined by discounting all future cash flows using an imputed rate of interest. The difference between the fair value and the nominal amount of the consideration is recognized as interest revenue. When the consideration is received in advance, it is initially recognized as a liability and subsequently recognized as revenue only when the revenue recognition criteria are met. Exchanges of Goods or Services Exchanges of goods or services with: a. Similar nature and value do not give rise to revenue. b. Dissimilar nature and value give rise to revenue measured using the following order of priority: i. Fair value of the goods or services received, adjusted by the amount of any cash transferred. ii. Fair value of the goods or services given up, adjusted by the amount of any cash transferred. Non-exchange Transactions Revenue from non-exchange transactions are derived mostly from taxes, fines and penalties, gifts, donations and goods in-kind. These are received without directly providing something of equal value in return. Taxes - are compulsory payments intended to provide revenue to the government. Taxes do not include fines and penalties. Fines and penalties - are monetary sanctions received as a consequence of breach of laws. Gifts, Donations and Goods/Services In-kind - are voluntary transfers of assets and services that one entity makes to another, normally free from stipulations. Recognition of Revenue from Non-exchange Transactions Revenue from non-exchange transactions are recognized on a cash basis until a reliable measurement model is developed. Accordingly, the asset and revenue or liability arising from a non-exchange transaction are recognized when collected or when these are measurable and legally collectible. (GAM for NGAs, Chapter 5, Sec. 12) Tax revenue > Tax revenue is recognized at a gross amount and not reduced for expenses paid through the tax system. Expenses paid through the tax system are those expenses which should be paid irrespective of whether the taxpayer pays taxes, or uses a particular mechanism to pay taxes. > Tax revenue shall not be grossed up for the amount of tax expenditures. Tax expenditures are preferential provisions of the tax law that provide certain taxpayers with concessions that are not available to others. Tax expenditures are foregone revenue, not expenses. Transfers Transfers are inflows of future economic benefits or service potential from non-exchange transactions, other than taxes. (PPSAS 23) Transfers include fines, gifts, donations and goods and services in-kind, debt forgiveness, bequests, and grants. All of these transactions transfer resources without approximate equal value in exchange and are not taxes but some are with conditions. Fines and penalties Fines and penalties are recognized in as income in the year they are collected. (GAM for NGAs, Chapter 2, Sec. 33) However, fines are recognized as revenue when the receivable meets the recognition criteria for asset and are measured at the best estimate of inflow of resources to the entity. (GAM for GAs, Chapter 5, Sec. 24) An entity collecting fines in the capacity of an agent shall not treat those fines as revenue. Gifts, Donations and Goods In-kind Gifts, donations and goods in-kind are recognized as revenue when it is probable that future economic benefits or service potential will flow to the entity. Those that are received without conditions are recognized immediately as revenue. Those with conditions are initially recognized as liability and recognized as revenue only when the conditions are satisfied. Services In-kind Services In-kind are not recognized as revenue due to the uncertainties affecting the entity's ability to control those services and measure them at fair value. Examples of services in-kind include technical assistance from foreign bodies, community services rendered by persons convicted of offenses, volunteer services, and the like. Services in-kind received may be disclosed in the notes. Measurement Assets, liabilities and revenue arising from a non-exchange transaction are measured as follows: a. Assets - at the acquisition-date fair value. b. Liabilities - at present value, when the effect of time value of money is material. c. Revenue - at the amount of increase in net assets. If the non-exchange transaction is initially recognized as a liability, the subsequent reduction in that liability (e.g. because the condition is satisfied) is recognized as revenue. Debt Forgiveness When a lender cancels the debt of a government entity, the debtor recognizes revenue equal to the carrying amount of the debt forgiven. However, when a controlling entity cancels the debt of a wholly owned controlled entity, the cancelled debt is treated as contribution from owners and not revenue. Bequests Bequests are transfers made according to the provisions of a deceased person's will. A bequest that satisfies the recognition criteria for an asset is recognized as revenue, measured at the fair value of the resources received or receivable. Grant with Condition An asset received under a grant with condition is initially recognized as liability and recognized as revenue only when the condition is satisfied. Illustration: The national government (NG) received a foreign grant of P10M conditioned on the construction of a flood control system which must be completed within the next 2 years, otherwise the grant must be returned to the grantor. The Department of Public Works and Highways (DPWH) is the implementing entity. The journal entries are as follows: Pledges Pledges are unenforceable undertakings to transfer assets to the recipient entity. Pledges are not recognized as revenue because they do not meet the recognition criteria for asset, i.e., at present, the entity has not yet obtained control over the item pledged. If the pledged item is subsequently transferred to the recipient entity, it is recognized as a gift or donation. Pledges may warrant disclosure as contingent assets. Concessionary Loans Concessionary loans - are loans received by an entity at below market terms. The entity considers whether the difference between the transaction price (loan proceeds and the fair value of the loan on initial recognition is a non-exchange transaction. If it is so, the difference is recognized as revenue, except if a present obligation exists, in which case the difference is recognized as a liability and recognized as revenue only when the obligation is satisfied. Impairment Losses and Allowance for Impairment Losses When an amount already recognized as revenue becomes uncollectible, it is recognized as expense (impairment loss) rather than as an adjustment to the revenue originally recognized. Entities shall evaluate the collectability of accounts receivable on an ongoing basis based on historical bad debts, customer/recipient credit-worthiness, current economic trends and changes in payment activity. An allowance is provided for known and estimated bad debts. (GAM for NGAs, Chapter 5, Sec. 9) Other Receipts Other receipts include, but not limited to, the following: a. Receipt of subsidy from the National Government (i.e., disbursement authority), such as receipt of: Notice of Cash Allocation (NCA) Tax Remittance Advice Non-Cash Availment Authority Cash Disbursement Ceiling b. Receipt of subsidy or assistance from other government agencies, including LGUs and GOCCs. The Collecting Officer shall issue an official receipt (OR) upon receipt of any of these subsidies/assistance. The journal entries are as follows: e. Receipt of performance bond or security deposit. A performance bond is a security deposit required from a contractor or supplier to guaranty the full and faithful performance of a contract. It may be in the form of cash or certified check. The journal entries are as follows: All revenues shall be remitted to the BTr and included in the General Fund, unless another law specifically allows otherwise. Recording in other types of funds (e.g. Special Fund) shall be made only when authorized by law. Receipts shall be properly acknowledged through pre-numbered ORs. Receipts can be in the form of checks. Revenues of a government entity may arise from exchange and non-exchange transactions. Exchange transactions involve giving and receiving resources while non-exchange transactions involve either giving or receiving but not both. Revenue from exchange transactions are measured at the fair value of the consideration received or receivable. SOURCE: Government Accounting and Accounting For Non-Profit Organizations by Millan 2018 CHAPTER 6 DISBURSEMENTS Learning Objectives 1. State the main concepts in the disbursement of government funds. 2. Account for the different modes of disbursements. Introduction Disbursements constitute all payments in cash, in whatever manner (i.e., through cash, check, or other means). Disbursements shall be supported by Disbursement Vouchers (including Petty Cash Vouchers) or Payroll. Fundamental Principles for Disbursement of Public Funds a. All government resources shall be used only in accordance b. with the law and only for public purposes. Trust funds shall be used only for their specific purpose. c. Fiscal responsibility shall be strictly shared by all those exercising authority over a government agency. d. The use of government resources shall be approved by proper officials. e. Claims against government funds shall be supported with complete documentation. f. All laws and regulations applicable to financial transactions shall be faithfully adhered to, including generally accepted principles and practices of accounting, management and fiscal administration, provided that they do not contravene existing laws and regulations. (P.D. No. 1445) Expenditures funded by borrowings are included in the expenditure program of the entity. The loan proceeds shall not be used without the corresponding release of funds through a Special Budget. (GAM for NGAs, Chapter 2, Sec. 35) Authority to Disburse/Pay An entity can make disbursements only after it has received a disbursement authority, based on the following a. Notice of Cash Allocation (NCA) b. Notice of Transfer of Allocation (NA) c. Tax Remittance Advice (TRA) (Items 'a' to 'c' above are discussed in Chapters 2 and 3) d. Non-Cash Availment Authority (NCAA) - see discussion later e. Cash Disbursement Ceiling (CDC) - authority issued by the DBM to agencies with foreign operations (i.e., Department of Foreign Affairs 'DA' and Department of ALabor and Employment 'DOLE') allowing them to use the income collected by their Foreign Service Posts (FSPs) to cover their operating requirements. Basic Requirements & Certifications for Disbursements The following are required when disbursing funds: a. The Budget Officer (or Head of Budget Unit) shall certify the availability of allotment; b. The Chief Accountant (or Head of Accounting Unit) shall charge obligations against available allotment; > The foregoing are to ensure that no overdraft shall be incurred. An overdraft is incurred if obligations exceed the allotment. The incurrence of overdraft is prohibited. c. The Chief Accountant (or Head of the Accounting Unit) shall certify the availability of funds/cash and the completeness of the supporting documents before the Head of Agency (or his authorized representative) can enter into any contract involving the expenditure of public funds; All disbursements require the certification of the Chief Accountant (or Head of Accounting Unit). Certifications must be based on valid and properly authorized claims. Any certification for fictitious obligation is void. The certifying official shall be dismissed from service and shall be held criminally liable. Others who are involved in the fictitious transaction are also liable. (GAM for NGAs, Chapter 2, Sec. 37) d. The requesting and approving officials shall ensure that the disbursements are legal and conform to applicable rules and regulations; e. The Head of the Requesting Unit shall certify the necessity and legality of disbursements. Payments shall be made through Disbursement Vouchers (DVs) or Payroll and supported by the original copies of supporting documents; and f. The Head of Agency (or his authorized representative) shall approve all DVs or Payrolls. (GAM for NGAs, Chapter 2, Sec. 36) Modes of Disbursements The different modes of disbursements are as follows: a. Check b. Cash c. Cashless payments: i. Advice to Debit Account (ADA) ii. Electronic Modified Disbursement System (eMDS) iii. Cashless Purchase Card System (Credit Card) iv. Non-Cash Availment Authority (NCAA) v. Tax Remittance Advice (TRA) (GAM for NGAs, Chapter 2, Sec. 29 and Chapter 6, Sec. 7) Disbursements through Check Checks are used whenever payments cannot conveniently, or are not authorized to, be made through cash or ADA. The following are the two types of checks issued by government entities: a. Modified Disbursement System Checks - checks chargeable against the account of the Treasurer of the Philippines, maintained with different Modified Disbursement System-Government Servicing Banks (MDS-GSBs). b. Commercial Checks - checks chargeable against the Agency Checking Account with GSBs. These are covered by income/receipts authorized to be deposited with Authorized Government Depository Banks (AGDBs). All checks drawn, whether released or unreleased to payees, including cancelled checks, are recorded chronologically in the Checks/ADA Disbursement Record maintained by the Cash/Treasury Unit. Illustration: Entity A disburses P10,000 for electricity expenses. The entries are as follows: Disbursements through Cash Cash disbursements constitute payments through cash advances, including payments out of the petty cash fund. Cash advances are governed by the following rules: a. Cash advances shall be made only for a legally authorized specific purpose (i.e., payments for personnel services, petty expenses, and MOOE for field operating requirements). b. Cash advances, other than advances for travel, shall be given only to duly appointed Disbursing Officers who must be properly bonded. The amount of cash advance shall not exceed the maximum cash accountability under the bond. c. Only designated Disbursing Officers are allowed to perform disbursing functions and only permanently appointed officials shall be designated as disbursing officers. d. A cash advance must be liquidated as soon as the purpose for which it was given has been served. Cash advances for payroll shall be liquidated within 5 days after the end of the pay period. Unclaimed salaries shall be refunded and issued an official receipt to close the account. Cash advances for travel shall be liquidated as follows: i. Local travel - within 30 days upon return to the personnel's workstation. ii. Foreign travel - within 60 days upon return to the Philippines. No official or employee is allowed to go on an official foreign travel if he is due to retire within 1 year after the foreign travel. e. No additional cash advance shall be given to any official or employee unless the previous cash advance given to him is first liquidated. f. Transfer of cash advance from one officer to another is prohibited. g. A cash advance shall not be used to encash checks or to liquidate a previous cash advance. Illustration: Entity A disburses Php 10,000 for certain expenses through cash advance. The entries are as follows Disbursements through Advice to Debit Account (ADA) The ADA, or more specifically the List of Due and Demandable Accounts Payable - Advice to Debit Account (LDDAP-ADA), is an accountable form used as an authorization issued by a government agency to the MDS-GSB instructing the bank to debit a specified amount from its available NCA to pay the creditors/payees listed in the LDDAP-ADA. The ADA works like a check, except that one ADA can be drawn to pay various payees, as long as they all maintain accounts in the same bank where the ADA is drawn. Separate ADAs shall be prepared for payees using other MDS-GSBs. ADA payments are directly credited to the payees' accounts. Simply stated, an ADA is an authorization for a fund transfer (between accounts in same bank) or a bank transfer (between accounts with different banks) from the issuing agency's NCA bank account to the bank accounts of specified payees. The following expenditures shall not be paid through ADA: a. Payment of Terminal Leave and Retirement Gratuity benefits; b. Remittance of GSIS, PhilHealth, and Pag-IBIG contributions; c. Payments to utility companies (e.g., electricity, water, telephone, internet, petroleum, and the like). d. Other payables which cannot be conveniently nor practicably paid using the ADA. Disbursements through electronic Modified Disbursement System The eMDS is like the ADA except that disbursements are made directly from the accounts of the BTr that are maintained with the Land Bank of the Philippines (LBP). Agencies subscribed under LBP's eMDS can make online disbursements for selected transactions. Disbursements through Cashless Purchase Card (CPC) System Disbursements under the PC System are made through the use of an electronic card (i.e., credit card). The authorized credit card company is Citibank. Guidelines in the use of CPC System are as follows: a. CPC purchases shall be only for specific eligible items and only with specific merchants. Merchants. - refer to the sellers or suppliers authorized by Citibank. b. Only authorized individuals shall be allowed to use the PC, subject to monthly credit limits. Changes in credit limits or cardholders require the prior approval of the Steering Committee. c. Agency officials who approved the CPC are jointly accountable with the cardholders. d. The CPC System shall comply to, and shall not in any way change, the existing disbursement policies and procedures prescribed under the law. e. The amount covered by the CPC shall form part of the cash advance levels of the participating agencies. The CPC shall not be used to justify the increase in cash advance levels of participating agencies. f. The CPC shall initially be used for purchases of small value, non-common use items which are not available with the Procurement Service. g. Unauthorized items purchased using the CPC shall be the personal liability of the cardholder; without prejudice to the revocation of the cardholder's privileges and other penalties that the participating agencies may impose. h. Participating agencies shall immediately inform the Citibank of any discrepancy regarding items which they dispute as having been procured using the PC. i. Participating agencies shall ensure the timely payment of PC billings. In case of delays, late payment charges shall be the personal liability of the employee directly responsible for the delay. The NCA shall never be used to pay late payment charges. j. The cardholder shall submit all receipts from use of the PC to the accounting unit. These shall be used in inspecting actual goods purchased and in paying credit card billings. k. The accounting unit shall check if the procured items are those allowed by law to be purchased using the CPC and compare the charge slips with the amounts in the billing statement. l. In case the CPC is lost or stolen, the cardholder shall immediately notify the Program Administrator and the Citibank. The Program Administrator shall determine whether the cardholder was negligent and whether the cardholder's privileges shall be reinstated or permanently suspended. The cardholder shall be liable for any PC charges during the period the card was lost or stolen. Disbursements through Non Cash Availment Authority (NCAA) Non-Cash Availment Authority (NCAA) is the authority issued by the DBM to agencies to cover the liquidation of their actual obligations incurred against available allotments for availment of proceeds from loans/grants through supplier's credit/constructive cash. Disbursements through NCAA (also called Direct Payment Method' or 'Direct Payment Scheme of Loan Availment) are made through the Journal Entry Voucher (JEV) issued by the BTr to the agency to record payment of goods and services made directly by the lending institution to the supplier or contractor. The JEV is recorded in the General Journal. Illustration: Entity A acquires communication equipment for P1M, on account, and subsequently settles the account through direct payment scheme. Notice that no cash is involved in the acquisition of the equipment, settlement of the accounts payable, and recognition of the loans payable. The lending institution directly pays the supplier. Disbursements through Tax Remittance Advice (TRA) TRA is used for the constructive remittance of taxes or customs duties withheld to the BIR or BOC; respectively. (See discussion in Chapter 3) Accounting for Disallowances Disallowances refer to expenditures made by an agency that are subsequently invalidated or disallowed by the COA because they are found to be irregular, unnecessary, excessive, extravagant or unconscionable. Disallowances are recorded in the books of accounts only when they become final and executory. Notice that the accounting for disallowances by a government entity is similar to the accounting for current and prior period errors by a business entity. Accounting for Overpayments "Sometimes overpayments or even double payment of expenditures do happen in agencies. These could be avoided with the institution of proper controls but some could not be avoided because of built-in procedures. One example is the payment of payrolls. Payrolls are prepared in advance and some agencies pay their employees through the banking system. All these are done before reports of attendance are submitted, making it impossible to know the exact amount to be paid in case there are absences without pay during the pay periods. In case of overpayments, refunds shall be demanded of the employees concerned." (GAM for NGAs, Chapter 6, Sec. 48) Correcting entries for overpayments are similar to accounting for disallowances. SUMMARY Disbursement authorities: a. Notice of Cash Allocation (NCA); b. Notice of Transfer of Allocation (NTA); c. Tax Remittance Advice (TRA); d. Non-Cash Availment Authority (NCAA); and e. Cash Disbursement Ceiling (CDC) All disbursements require the following certifications: a. Availability of allotment - Budget Officer b. Availability of funds and completeness of supporting documents - Chief Accountant c. Necessity and legality of disbursements - Head of the Requesting Unit All disbursements shall be made through Disbursement Vouchers (DVs) or Payroll which are approved by the Head of Agency. Modes of Disbursements: a. Check; b. Cash; C.Cashless payments: i. Advice to Debit Account (ADA), Electronic Modified Disbursement System (eMDS), Cashless Purchase Card System (Credit Card),Non-Cash Availment Authority (NCAA), and Tax Remittance Advice (TRA) SOURCE: Government Accounting and Accounting For Non-Profit Organizations by Millan 2018 CHAPTER 7 INVENTORIES Learning Objectives 1. Account for inventories by a government entity. 2. Describe the procedures in the receipt and disposition of inventories by a government entity. Introduction Inventories are assets: a. Held for sale or distribution in the ordinary course of operations (Finished goods); b. In the process of production for sale or distribution (Work in process); or c. In the form of materials or supplies to be consumed in the production process or distributed in the rendering of services (Raw materials and supplies). More specifically, the inventories of a government entity consists of the following: a. Inventory Held for Sale (e.g., medicines for sale in government pharmacies) b. Inventory Held for Distribution (e.g., rice and other welfare goods held for distribution) h c. Inventory Held for Manufacturing (e.g., raw materials, work-in-process) d. Inventory Held for Consumption (e.g., office supplies inventory) e. Semi-Expendable Property - consists of machinery, equipment, furniture and fixtures and similar items that are not capitalized as PPE because their costs are below the P15,000 capitalization threshold for PPE. Measurement Inventories are initially measured at cost and subsequently measured as follows: Cost comprises the following a. Purchase cost, excluding trade discounts, rebates, and other similar deductions in purchase price. b. Direct costs incurred in bringing the asset to its intended location and condition (e.g., freight costs, conversion costs - such as costs of labor and production overhead for manufactured items). Cost excludes the following: а. Abnormal amounts of wasted materials, labor, and production overhead; b. Selling costs; and c. Administrative overheads Exceptions: a. Inventories received from non-exchange transactions (e.g., donations) are initially measured at acquisition-date fair value. b. Agricultural produce are initially measured at fair value less costs to sell at the point of harvest. For these items, their initial measurements are deemed their costs for purposes of subsequent measurement at the lower of cost or NRV/Current replacement cost. Net Realizable Value (RV) is estimated selling price less estimated costs of completion and estimated selling/disposal costs. Current replacement cost is the cost the entity would incur to acquire the asset on the reporting date. Cost Formulas Cost of goods sold and cost of inventories on hand are determined using the following cost formulas: a. Specific identification - this shall be used for items that are not ordinarily interchangeable (i.e., unique) and those that are segregated for specific projects. Under this formula, specific costs are attributed to identified items of inventory. Accordingly, cost of sales represents the actual costs of the specific items sold while ending inventory represents the actual costs of the specific items on hand. b. Weighted average cost - this shall be used for large numbers of items of inventory that are ordinarily interchangeable. This shall be applied under a perpetual inventory system. Under this formula, a new weighted average unit cost is computed after every purchase. The computed average costs are used in determining the cost of goods sold and inventory on hand. Accordingly, cost of sales and ending inventory are stated at average costs, rather than at the actual costs of the inventories sold or on hand. This method is commonly referred to in traditional accounting by business entities as the "moving average" cost formula. Government entities shall use the perpetual inventory system. Under this system, purchases, sales, and other transactions affecting inventory are recorded in the "inventory" and "cost of sales" accounts, as appropriate. Moreover, stock cards and stock ledgers are maintained. These enable the retrieval of information on costs and quantities of inventories. sold and on hand at any given point of time. However, purchases of supplies and materials out of the petty cash fund for immediate use or on emergency cases are charged directly as expense.. The FIFO cost formula and the periodic inventory system are not used by government entities. Recognition as an Expense The carrying amount of an inventory is recognized as expense in the period it is sold, distributed, exchanged, or consumed. The write-down of inventory to its NRV or Current replacement cost, as appropriate, is also recognized as expense. Illustration: Entity A acquires inventory for P1,000, on account. Receipt and Disposition of Inventories Receipt 1. End users prepare the Purchase Request (PR) form to request for the purchase of items not available on stock. The PR is the basis in preparing the Purchase Order. "End users' refer to the individuals who will actually be using the items. For example, the end users of office supplies are those who are working in the office; the end users for cleaning materials are the janitors. As an internal control, only the appropriate end users are allowed to make purchase requests for the items they need. It would be inappropriate for an office clerk to make a purchase request for cleaning materials. 2. The authorized official prepares the Purchase Order (PO). The PO is a document issued to the supplier when making a purchase. It indicates the specifications, quantities, and agreed prices of the items being purchased. The PO serves as the contract between the entity and the supplier. Recall that a canvass from at least 3 suppliers is required for purchases amounting to P1,000 and above. 3. When the purchased items are delivered, the Property/Supply Division signs the "received" portion of the Delivery Receipt (DR) and prepares the Inspection and Acceptance Report (IAR). The IAR will be used by the Property Inspector in inspecting and accepting the delivered items. The Property/Supply Division forwards the DR, IAR and PO to the Property Inspector. 4. The Property Inspector inspects the conformance of the delivered items with the specifications in both the PO and DR and indicates the result of the inspection (i.e., acceptance or rejection) in the IAR. Rejected deliveries will be returned to the supplier. 5.The Property Inspector forwards the copies of DR, IAR and PO to both the Property/ Supply Division and Accounting Division for recording. The Property/Supply Division, through the Stock Card Keeper, records the accepted deliveries in the Stock Card (SC). The SC shows the quantities of all receipts and issuances of inventory, as well as the available balance at any given point of time. 6. The Accounting Division records the accepted deliveries in the books of accounts and in the Supplies Ledger Card (SLC). The SLC shows both the quantities and monetary amounts of all receipts and issuances of inventory, as well as the available balance at any given point of time. As an internal control, the SC (maintained by the Property/Supply Division) and SLC (maintained by the Accounting Division) are periodically reconciled. 7. The Property/Supply Division prepares the Disbursement Voucher (DV) then forwards it, together with supporting documents, to the Accounting Division for processing of payment. Disposition 8. End users prepare the Requisition and Issue Slip (RIS) to request for the issuance of items available on stock. The Head of the requesting individual shall approve the RIS. The approved RIS is then forwarded to the Property/Supply Division. 9. The Property/Supply Division prepares the Report of Supplies and Materials Issued (RSMI). The RSMI will be used by the Stock Card Keeper in updating the SC and the Accounting Division in journalizing the items issued. 10. The Accounting Division records the items issued in the books of accounts and updates the SLC. 11. The following are other documents used in the disposition of inventories: a. Waste Materials Report - prepared by the Property or Supply Custodian to report wasted materials, such as destroyed spare parts and other spoilages. b. Report on the Physical Count of Inventories - used in reporting the results of physical counts. It shows the balance of inventory, as well as any shortages or overages. C. Report of Accountability for Accountable Forms - used to report the movement and status of accountable forms in the possession of an officer. d. Inventory Custodian Slip - prepared when issuing semi-expendable property. SUMMARY The inventories of government entities include the following: Inventory Held for Sale, Inventory Held for Distribution (eg, welfare goods held for distribution), Inventory Held for Manufacturing, Inventory Held for Consumption (e.g., office supplies), and Semi-Expendable Property (PPE-like items below the P15,000 capitalization threshold for PPE). Goods held for sale are subsequently measured at the Lower of Cost and NRV while goods held for distribution are subsequently measured at the Lower of Cost and Current replacement cost. The FIFO cost formula and the Periodic inventory system are not used by government entities. SOURCE: Government Accounting and Accounting For Non-Profit Organizations by Millan 2018 CHAPTER 8 Accounting for LGUs GOVERNMENT ACCOUNTING MANUAL for Local Government Units Objective: To internationally align the financial reporting framework of the Philippine Government, the Commission on Audit under its exclusive authority granted in the 1987 Constitution to promulgate accounting rules and regulations adopted the International Public Sector Accounting Standards. The Commission harmonized the International Public Sector Accounting Standards to the Philippine setting and is now known as the International Public Sector Accounting Standards (IPSAS). The Local Government Sector through the dynamic leadership of Assistant Commissioner Divinia M. Alagon initiated the constitution of a team to develop the accounting manual for the local governments compliant to the IPSAS. The Government Accounting Manual for Local Government Units will serve as guide to local government finance officers, accountants, bookkeepers, budget officers, general service officers, and other officers in the actual implementation of the new accounting framework which shall be the basis in preparing and presenting the general purpose financial statements. INTRODUCTION Section 1. Objective. This Manual prescribes the guidelines for the uniform recognition, measurement, presentation and disclosure of financial transactions, and preparation of financial reports in the local government units (provinces, cities and municipalities). Section 2. Coverage. This Manual covers the basic policies and standards, the chart of accounts, the detailed guidance for the recognition, measurement and presentation procedures, and the record and report forms and formats. Section 3. Legal Basis. This Manual is prescribed by the Commission on Audit pursuant to Section 2(2), Article IX-D 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). BASIC FEATURES AND POLICIES Section 4. Basic Features and Policies. The Local Government Accounting System shall have the following features and policies, to wit: a. International Public Sector Accounting Standards (IPSAS). IPSAS shall be the framework in the preparation and presentation of the local governments’ financial statements. b. Accrual accounting. Income and expenses shall be on accrual basis of accounting. Income from taxes shall be recognized as receivable when the taxable event occurs. Expense shall also be recognized upon incurrence. c. Fund Concept. Local governments, except the barangays, shall maintain three funds; namely: 1. General Fund 2. Special Education Fund 3. Trust Fund d. Separation of Books. Separate set of books of accounts shall be maintained for each fund. e. Budgetary Accounts. Separate set of books shall be maintained for the budgetary accounts in view of the difference of the budgetary basis from the accounting basis. f. Special Accounts in the General Fund. Special Accounts in the General Fund (SAGF) shall be maintained for the following: 1. Public utilities and economic enterprises 2. Loans, interests, bonds issued and other contributions for specific purposes 3. Development projects funded from the Share in Internal Revenue Collections 4. Share from National Wealth 5. Such other special accounts which may be created by law or ordinance g. Complete subsidiary records for all accounts (assets, liabilities and equity) shall be maintained for public utilities and economic enterprises. Subsidiary records for the receipts, transfers and expenditures of all other special accounts shall be maintained. h. Chart of accounts. A new chart of accounts shall be adopted. i. Books of accounts. The following books of accounts shall be maintained: 1. Books of original entry i. Cash Receipts Journal ii. Procurement Received Journal iii. Cash Disbursement Journal iv. Check Disbursement Journal v. Authority to Debit Account Disbursement Journal vi. General Journal 2. Books of Final Entry i. General Ledger ii. Subsidiary Ledgers 1. Special Accounts 2. General Ledger Accounts j. Cashbooks. Treasurers and disbursing officers shall maintain the following cashbooks, as applicable: 1. Cashbook – Cash in Treasury 2. Cashbook – Cash in Bank 3. Cashbook – Cash Advances (except for Cash Advances to Officers and Employees) k. General Purpose Financial Statements. A complete set of financial statements comprises: 1. Statement of financial position 2. Statement of financial performance 3. Statement of changes in net assets/equity 4. Statement cash flows 5. Statement of comparison of budget and actual amounts 6. Notes to financial statements, comprising a summary of significant accounting policies and explanatory notes l. Consolidated financial statements. Financial statements of controlled entities shall be consolidated with the financial statements of the controlling entity. m. Current/Non-Current Distinction. LGUs shall present current and non-current assets, and current and non-current liabilities, as separate classifications on the face of their statement of financial position. n. Current Asset. Asset shall be classified as current when it is expected to be realized in, or is held for sale or consumption within, the LGU’s accounting cycle or cash or cash equivalent not restricted for exchanged or used for at least 12 months after the reporting date. o. Current Liability. Liability shall be classified as current when it is expected to be settled in the LGU’s accounting cycle or twelve months after the reporting date. p. Non-current Assets or Liabilities. All other assets or liabilities not classified as current shall be considered as non-current. q. Direct Method. The Cash Flow Statement shall be presented following the direct method of presentation. r. Cash equivalents. Cash equivalents shall comprise short term investments with maturities of 3 months or less from acquisition date that are readily convertible to known amounts of cash and which are subject to insignificant risk in changes in value. s. Changes in Accounting Policy. Any change in the accounting policy shall be applied to transactions, other events and a condition retrospectively as if the policy had always been observed except to the extent that it is impracticable to determine either the period-specific effects or the cumulative effect of the change. t. Changes in Accounting Estimates. Any change in accounting estimate shall be applied prospectively. u. Prior Period Errors. Omissions from, and misstatements in, the entity’s financial statements for one or more prior periods shall be corrected through retrospective restatement in the recognition, measurement, and disclosure of amounts of elements of the financial statements as if a prior period error had never occurred. v. Appropriations and Allotments. The Budget Office shall maintain the Record of Appropriations and Allotments, which shall be the basis for the certification as to the availability of appropriations. w. Allotments and Obligations. The Accounting Office shall maintain the Registry of Appropriations, Allotments and Obligations, which shall be the basis in the recording of allotments and obligations in the books of accounts. x. Measurement of Inventory. Inventories for sale at the end of the period shall be measured at the lower of cost or net realizable value. Inventories for distributed at no charge or nominal charge and those for consumption shall be measured at the lower of cost and current replacement cost. Where inventories are acquired through non-exchange transaction, their cost shall be measured at their fair value at the date of acquisition. y. Weighted average cost formula. Cost of each item for similar inventory items shall be computed through the weighted average cost formula. The cost of each item is determined from the weighted average cost of similar items at the beginning of the period and the cost of similar items purchased for the period. z. Cost Model. After recognition as an asset, property, plant and equipment shall be carried at its cost, less any accumulated depreciation and any accumulated impairment losses. aa. Infrastructure assets. These are assets that display some or all the following characteristics: 1. Part of a system or network 2. Specialized in nature and do not have alternative uses 3. Immovable 4. Subject to constraints on disposal These assets shall be accounted for in the same manner as property, plant and equipment, and be subject to depreciation, impairment and derecognition. These include, among others, road networks, flood controls, sewer systems, etc. bb. Replacement costs. Replacement cost shall be recognized as part of the cost of the property, plant and equipment. The carrying amount of the replaced part shall be derecognized. cc. Derecognition of Infrastructure Assets. Replaced portion of infrastructure assets shall be derecognized. If it is not practical to determine the cost of the carrying amount of the replaced part, the replacement costs may be used as the carrying amount of the replaced portion which is the subject of the derecognition. dd. Cost of Property, Plant and Equipment. The cost of an item of PPE comprises: 1. Its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates. 2. Any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. 3. The initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, the obligation for which an entity incurs either when the item is acquired, or as a consequence of having used the item during a particular period for purposes other than to produce inventories during the period. ee. Criteria for Capitalization Threshold. Asset items classifiable as Machinery and Equipment; Furniture, Fixtures and Books; and Other Property, Plant and Equipment with individual cost of at least P15,000 and a life of more than one year shall be recognized as Property, Plant and Equipment. However, items with individual values below the threshold but which work together in the form of a group of network assets and whose total value exceeds the threshold shall be recognized as part of the primary PPE. (Example: printers) ff. Depreciation. The straight line method of depreciation shall be used. A residual value of five percent of the cost shall be set up (except for the road network system of which no residual value shall be recognized) and depreciation shall start when the PPE begins to be available for use, i.e., when the PPE is in the location and condition necessary for it to be capable of operating in the manner intended by management. Depreciation ceases when the asset is derecognized or if the asset is fully depreciated. gg. Impairment. Assets, except Inventories and biological assets shall be tested for impairment. Impairment is the loss in the future economic benefits or service potential of an asset, over and above the systematic recognition of the loss of the asset’s future economic benefits or service potential through depreciation. When the carrying cost of an asset is higher than its recoverable cost or service potential, the asset is impaired, thus, the need to recognize an impairment loss. hh. Biological assets. Living animal or plant assets of the agency shall be recognized and measured on initial recognition and at each reporting date at its fair value less cost to sell. ii. Recognition of liability. Liability shall be recognized at the time goods and services are accepted or rendered and supplier/creditor bills are received. jj. Interest accrual. Interest income and/or expense shall be recognized on a time proportion basis in the books of accounts. kk. Rendition of accounts by accountable officers. Local treasurers, accountants and other accountable officers shall render their accounts in accordance with COA regulations. ACCOUNTING SYSTEM A. GENERAL ACCOUNTING PLAN Section 5. General Accounting Plan. The General Accounting Plan shows the overall accounting cycle in the Local Government Unit. Separate plan presents the budgetary accounts and another for the financial transactions. 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. The General Accounting Plan for the Budgetary Accounts (Table 1) presents the following type of budgetary transactions: a. Annual Budget b. Realized Sources of Funds c. Supplemental Budget d. Realignment of Budget e. Allotment f. Obligations g. Consummated Obligations The General Accounting Plan for the Financial Transactions (Table 2) presents the following financial transactions: a. Collections and Deposits b. Disbursements Cash Check Authority to Debit Account c. Procurements Received d. Miscellaneous and Other Transactions e. Adjusting Entries f. Closing Entries B. BUDGETARY ACCOUNTS Section 6. Budgetary Accounts. Budgetary accounts are composed of estimates of income, revenues and receipts, appropriations, allotments, obligations and commitments. Transactions of the budgetary accounts shall be recorded in the books of accounts for the budgetary accounts. Section 7. Budget. A budget is a financial plan containing the estimates of income and total appropriations covering the current operating expenditures and capital outlays of a local government unit. The budget document contains the following: 1. A budget message of the local chief executive setting forth in brief the significance of the executive budget, particularly in relation to the approved local development plan; 2. A brief summary of the functions, projects, and activities to be accomplished in pursuit of the goals and objectives of the local government unit for the ensuing fiscal year, specifically the delivery of basic services or facilities enumerated under Section 17 of the Local Government Code; 3. Summary of financial statements setting forth: a. The actual income and expenditures during the immediately preceding year; b. The actual income and expenditures of the first two (2) quarters and the estimates of income and expenditures for the last two (2) quarters of the current fiscal year; c. The estimates of income for the ensuing fiscal year from ordinances and laws existing at the time the proposed budget is transmitted, together with other proposals; d. The estimated expenditures necessary to carry out the functions, projects, and activities of the local government unit for the ensuing fiscal year; e. All essential facts regarding the bonded and other long-term obligations and indebtedness of the local government unit, if any; f. Summary statement of all statutory and contractual obligations due; and g. Such other financial statements and data as are deemed necessary or desirable in order to disclose in all practicable detail the financial condition of the local government unit. Section 8. Estimates of Income/Revenues and Receipts. The estimates of income consist of the estimates of revenues and receipts from local (internal) and external sources as well as the estimates from proceeds of loans and borrowings, and revenues expected to be realized during the year. The local and external revenue sources of receipts are as follows: 1. Local Sources Tax Revenue Non-Tax Revenue 2. External Sources Share from Internal Revenue Taxes Share from Government-Owned and/or Controlled Corporations (GOCCs) Other Share from National Tax Collections Assistance and Subsidy Inter-local transfers Capital Investment receipts Receipts from Loans and Borrowings Section 9. Accounting for Estimates of Income/Revenues and Receipts. Based on the approved annual budget, the Accounting Office shall prepare a journal voucher to record the estimates of income, revenues and receipts. The estimates shall be taken up by a debit to the Estimates of Income, Revenues and Receipts account and a credit to the appropriate estimated income group accounts. This shall be recorded in the books of the budgetary accounts. The details of the estimates of income, revenues and receipts shall be posted in the Registry of Estimates and Actual Income, Revenues and Receipts (REAIRR). Section 10. Appropriations. Appropriation is an authorization made by ordinance, directing the payment of goods and services from the local government funds under specified condition or for specific purposes. Appropriation also refers to estimates of expenditures in a budget when finally authorized and reviewed by the appropriate authorities concerned. The local sanggunian authorizes the annual budget thru the issuance of appropriation ordinance. Section 11. Functional Classification of Appropriations. Appropriate records shall be maintained for Appropriations, Allotments and Obligations. Appropriations shall be recorded in accordance with the functional classifications, programs and projects as follows: 1. General Public Services Executive Services Legislative Services Planning and Development Coordination Services Budgeting Services Treasury Services Accounting Services Administrative Services Civil Registry Services General Services Assessment of Real Property Services Local Disaster Risk Reduction and Management Office Auditing Services Information Services Legal Services Prosecution Services Administrative of Justice Services Land Registration Services Mining Claim Registration Services Police Services Fire Protection Services 2. Education, Culture, Sports and Manpower Development Public Education Services Medical Subsidiary Services Manpower Development Services Maintenance of Sports Center, Athletic Field and Playground Maintenance Services Cultural Projects Cultural/Conference/Convention Center Operations 3. Health Services Health Services Field Projects (Immunization, Inoculation, Blood Donor Services) Day Care Clinic Hospital Services Chest Clinic 4. Labor and Employment Labor and Employment Services 5. Housing and Community Development Housing Projects Street Cleaning Garbage Collections Sewerage and Drainage System Street Lighting Community Development Services 6. Social Welfare Services Social Welfare and Development Services Family Planning Services Other Social Services 7. Economic Services Agricultural Services Veterinary Services Natural Resources Services Architectural Services Engineering Services Economic Enterprises and Public Utilities Operations Services Tourism Services 8. Other Services 20% Development Fund Local Disaster Risk Reduction and Management Fund Share from Development of National Wealth Share from Tobacco Excise Tax Services that cannot be categorized in any of the Sectors identified above Section 12. Accounting for Appropriations. The journal voucher shall be drawn to record the annual budget of the local government unit. The accounting entry to take up the appropriations shall be a debit to Appropriations – Annual Budget and a credit to Legislative Appropriations. The details of the appropriations shall be recorded in the following registries maintained for each office/project under each service provided in each functional classification: a. Registry of Appropriations, Allotments and Obligations – Capital Outlay (RAAOCO) b. Registry of Appropriations, Allotments and Obligations – Personal Services (RAAOPS) c. Registry of Appropriations, Allotments and Obligations– Maintenance and Other Operating Expenses (RAAOMOOE) d. Registry of Appropriations, Allotments and Obligations – Financial Expenses (RAAOFE) The Local Disaster Risk Reduction Management Fund (LDRRMF) shall be recorded in the Registries as follows: a. Registry of Appropriations, Allotments and Obligations–Quick Response Fund b. Registry of Appropriations, Allotments and Obligations – Capital Outlay (RAAOCO) c. Registry of Appropriations, Allotments and Obligations– Maintenance and Other Operating Expenses (RAAOMOOE) The registries shall be updated for every change or additions in the appropriations. Separate sets of registries shall be maintained for current and continuing appropriations. Section 13. Accounting for Supplemental Budget and Realignments. Supplemental budgets enacted during the year are similarly recorded as the annual budget. A journal voucher is drawn and the details are recorded in the registries of both the estimates of income, revenues and receipts and the appropriations. Realignments of the annual budget items shall likewise be recorded thru a journal voucher based on the approved ordinance for the purpose. The Accounting Office shall effect the changes in the Registry of Appropriations, Allotments and Obligations showing the reductions and additions of the budget items. Section 14. Accounting for Re-enacted Budget. In case the LGU is operating on a re-enacted budget, said re-enacted budget shall likewise be recorded in the registries. The amount to be taken up in the books shall be limited to the annual appropriations for salaries and wages of existing positions, statutory and contractual obligations, like the 5% contributions to the Metro Manila Development Authority for LGUs in NCR only, Terminal Leave and Retirement Gratuity Benefits and Debt Service, and essential operating expenses authorized in the annual and supplemental budgets for the preceding year. Once the current budget is approved, the necessary adjustments shall be made by taking up the approved annual budget less the amount previously recorded. Section 15. Allotments. Allotment is the authorization issued by the Local Chief Executive (LCE) to a department/office of the LGU, which allows the LGU to incur obligations, for specified amounts, within the appropriation ordinance. The Local Budget Matrix (LBM) or Local Budget Execution (LBE Form No. 1) is issued to effect the comprehensive release for a particular department/office. Release of reserve amounts or amounts for later release, including appropriated amounts under the needing clearance of the LBM shall be effected through the use of Allotment Release Order (ARO) or LBEF No. 2. Section 16. Accounting for Allotments. The Accountant, upon receipt of the Local Budget Matrix or Allotment Release Order shall draw a journal voucher to record the allotments in the General Journal and in the Registries of Appropriations, Allotments and Obligations. Allotments, obligations for the LDRRMF shall be similarly recorded in the respective registries. The accounting entry to take up release of allotment shall be a debit to Released Current Allotment and a credit to Current Allotment. Section 17. Obligations. Obligations refer to the amounts committed to be paid by the LGU for any lawful expenditure made by an accountable officer for and in behalf of the local government unit concerned. Section 18. Accounting for Obligations. All obligations must be accompanied by a certificate signed by the local budget officer, the local accountant, and the local treasurer showing that an appropriation therefore exists, the estimated amount of such expenditure has been obligated, and the funds are available for the purpose, respectively. For this purpose, Certification on Appropriations, Funds and Obligation of Allotment (CAFOA) form shall be accomplished in six (6) copies. The Head of the Requesting Unit shall prepare the CAFOA. The original and four copies of the CAFOA together with the supporting documents shall be forwarded to the local budget officer and a file copy retained. The local budget officer shall certify as to the existence of available appropriation by signing the appropriate box of the CAFOA. Four copies (original and three additional copies) of the CAFOA shall be forwarded to the local treasurer and a copy shall be retained on file. The local treasurer shall certify as to the availability of funds by signing the appropriate box of the CAFOA. Three copies (original and two additional copies) of the CAFOA shall be forwarded to the Accounting Office and a copy shall be retained on file. The Accounting Office shall process the CAFOA. 1. Examine the CAFOA for regularity. 2. Verify reference to the Registry whether there is an unobligated balance of allotment sufficient to meet the requested obligation. 3. If funds are sufficient, assign obligation number to CAFOA for identification and indicate thereon the approved amount and the date of approval. 4. Write the amount obligated. 5. Forward the CAFOA for signature of the Accountant. 6. Forward a copy of the CAFOA to the Registry keeper, file one copy sequentially with the supporting documents and return the original copy to the requesting official to be attached to the disbursement voucher. 7. Processed CAFOAs shall be filed in the active file, and the subsidiary ledger portion of the form shall be filled up and updated to indicate the status of the obligation. All processed CAFOAs shall be maintained in the active file and all CAFOAs with consummated obligations (services rendered/goods delivered) shall be filed in the consummated file to denote the consummation of the transactions or recognition of the payable account. CAFOAs of all paid transactions shall be filed in the inactive file. The total amount of all balances (obligations minus consummated obligations) of the active CAFOAs shall be equal to the total commitments and the total balance (consummated minus paid) of the CAFOAs with the consummated file shall be equal to the unpaid obligations. All processed CAFOAs shall be recorded in Section B (Actual) of the appropriate Registry of Appropriations, Allotment and Obligations (RAAOs) under the Obligations column and extended to the proper Details column. The registries shall be monitored and updated for each obligation incurred to ensure that obligations do not exceed the available allotments. At the end of each month, the RAAOs shall be footed. The total amount of the Obligations column shall equal to the overall total of the Details columns. The total obligations of all RAAOs for the current and the continuing appropriations shall be summarized separately. The total Obligations from current appropriations shall be recorded as a debit to the account Current Allotment – Obligated and a credit to Obligations-Current Allotment. Obligations from continuing appropriations shall be recorded as a debit to the account Continuing Allotment – Obligated and a credit to Obligations-Continuing Allotment. Any correction/adjustment by the Accounting Office which will require the corresponding adjustment in the CAFOA and in the appropriate Registries shall be coordinated with the Budget Office monthly. Section 19. Consummated Obligations. Refers to the incurred obligations funded from either the current or continuing appropriations and for which the corresponding services have been rendered or the subject goods have been delivered. Section 20. Accounting for Consummated Obligations. Upon receipt of the processed vouchers of claims for services rendered or goods delivered, the corresponding CAFOAs in the active file shall be updated. At the end of the month, separate Summary of Consummated Obligations shall be prepared for consummated obligations charged to current and continuing appropriations. A journal voucher shall be drawn to record the consummated obligations by a debit to Current Allotment – Obligations Consummated for obligations charged to the current appropriations and Continuing Allotment - Obligations Consummated for obligations charged to the continuing appropriation and both to be credited to the account Consummated Obligations. Section 21. Commitments. Commitment is an obligation of which a contract has been perfected; however, the corresponding liability has not been recognized as of the financial statement date due to non-delivery of procured goods or services. Section 22. Accounting for Commitments. At the end of the year, the CAFOAs in the active file shall be equal to the total obligations from current and continuing allotment which has not been closed to the Consummated Obligations account. A JV shall be drawn at the end of the year as a closing entry debiting Obligations-Current Allotment and/or Obligations-Continuing Allotment and crediting Current Allotment – Obligations Consummated and Continuing Allotment - Obligations Consummated and the difference to the account Commitments. This represents the total obligations of which no liability has been recognized yet. Section 23. Accounting for the Realized Income, Revenues and Receipts. At every end of the month, the Accounting Office shall prepare a report on the realized income, revenues and receipts considered as budget sources of funds. Based on the duly certified report a journal voucher shall be drawn to record the debit to the Fund Balance account and a credit to the Realized Income, Revenues and Receipts account. The details shall be recorded in Part B (Actual Collections) section of the Registry of Estimates and Actual Income, Revenues and Receipts. Section 24. Accounting for the Unreleased Appropriations for Capital Outlays. At the end of the year, unreleased appropriations for capital outlays shall be recognized as continuing appropriations. Section 25. Accounting for the Unobligated Allotments for Capital Outlays. At the end of the year, unobligated allotments for capital outlays shall be recognized as continuing allotments. Section 26. Accounting for Unreleased/Unobligated Current Operating Appropriations/Allotments. Unreleased/Unobligated current operating appropriations/ allotments shall be reverted back to the unappropriated funds at the end of the year. Utilization thereof shall be subject to the budget process. The unreleased/unobligated current operating appropriations/allotment of special purpose funds (20% Development Fund, Share from National Wealth and Share from Tobacco Excise Tax) shall only be appropriated within the same special purpose. Section 27. Accounting for the Unrealized Estimates of Income, Revenues and Receipts. At the end of the year all unrealized estimates of income, revenues and receipts recognized as sources of funds for the budget shall be adjusted accordingly in the books of accounts for the budgetary accounts. Section 28. Illustrative Accounting Entries. C. INCOME/REVENUES/RECEIPTS/COLLECTIONS AND DEPOSITS Section 29. Income. Income refers to all revenues and receipts collected or received forming the gross accretions of funds of the local government unit. Section 30. Revenues. Revenue refers to income derived from the regular system of taxation enforced under authority of law or ordinance, and, as such, accrue more or less regularly every year. Section 31. Receipts. Receipts refers to income realized from operations and activities of the local government or are received by it in the exercise of its corporate functions, consisting of charges for services rendered, conveniences furnished, or the price of a commodity sold, as well as loans, contributions or aids from other entities, except provisional advances for budgetary purposes. Section 32. 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. Section 33. Depository Accounts. Local treasurer shall maintain depository accounts in the name of their respective local government units with authorized government depository banks, located in or nearest to their respective areas of jurisdiction. Earnings of its depository accounts shall accrue exclusively thereto. Section 34. 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 units which shall be credited to the particular account or accounts to which the monies in question properly belong. Section 35. Sources of Income of LGUs. The main sources of revenue of LGUs are as follows: a. Tax revenue b. Service and Business Income c. Transfers, Assistance and Subsidy d. Shares, Grants and Donations e. Gains f. Miscellaneous Income Section 36. Tax Revenue accounts. The following shall comprise the tax revenue accounts applicable to LGUs: a. Tax on Individuals and Corporation 1. Professional Tax 2. Community Tax b. Property Taxes 1. Real property Tax – Basic 2. Special Education Tax 3. Special Levy on Idle Lands 4. Special Levy on Lands Benefited by Public Works Projects 5. Real Property Transfer Tax c. Taxes on Goods and Services 1. Business Tax 2. Tax on Sand, Gravel and Other Quarry Products 3. Tax on Delivery Trucks and Vans 4. Amusement Tax 5. Franchise Tax 6. Printing and Publication Tax d. Other Taxes e. Fines and Penalties f. Share from National Taxes 1. Share from Internal Revenue Collections (IRA) 2. Share from Expanded Value Added Tax 3. Share from National Wealth 4. Share from Tobacco Excise Tax (RA 7171 and 8240) 5. Share from Economic Zones Section 37. Service and Business Revenue Accounts. The following shall comprise the service and business revenue accounts applicable to LGUs: a. Service Income 1. Permit Fees 2. Registration Fees 3. Registration Plates, Tags and Stickers Fees 4. Clearance and Certification Fees 5. Supervision and Regulation Enforcement Fees 6. Inspection Fees 7. Verification and Authentication Fees 8. Processing Fees 9. Occupation Fees 10. Fishery Rentals, Fees and Charges 11. Fees for Sealing and Licensing of Weights and Measures 12. Fines and Penalties - Service Income 13. Other Service Income b. Business Income 1. School Fees 2. Affiliation Fees 3. Seminar/Training Fees 4. Rent Income 5. Communication Network Fees 6. Transportation System Fees 7. Road Network Fees 8. Waterworks System Fees 9. Power Supply System Fees 10. Seaport System Fees 11. Parking Fees 12. Receipts from Operation of Hostels/Dormitories and Other Like Facilities 13. Receipts from Market Operations 14. Receipts from Slaughterhouse Operations 15. Receipts from Cemetery Operations 16. Receipts from Printing and Publication 17. Sales Revenue 18. Garbage Fees 19. Hospital Fees 20. Dividend Income 21. Interest Income 22. Service Concession Revenue 23. Other Service Concession Revenue 24. Lease Revenue 25. Share in the Profit of Joint Venture 26. Fines and Penalties - Business Income 27. Other Business Income Section 38. Transfers and Subsidy accounts. The following shall comprise the transfers and subsidy accounts applicable to LGUs: a. Transfers refer to funds given to the fund or local government unit from other funds or agencies for specific purpose. 1. Transfers from General Funds as LGU Counterpart/Project Equity Share 2. Transfers from General Fund of Unspent DRRMF 3. Transfers from National Government Agencies 4. Transfers from Other Local Government Units b. Subsidies refer to transfer of funds to the fund or local government unit from other funds or government agencies without specific purpose. 1. Subsidy from National Government 2. Subsidy from Local Government Units 3. Subsidy from Government-Owned and/or Controlled Corporations 4. Subsidy from Other Funds 5. Subsidy from General Fund Proper/Other Special Accounts 6. Subsidy from Local Economic Enterprise/Public Utility Section 39. Shares, Grants and Donations. The following shall comprise the shares, grants and donations accounts applicable to LGUs: a. Shares 1. Share from PAGCOR 2. Share from PCSO b. Grants and Donations 1. Grants and Donations in Cash 2. Grants and Donations in Kind 3. Grants from Concessionary Loans Section 40. Gains. The following shall comprise the gains accounts applicable to LGUs: a. Gain from Changes in Fair Value of Financial Instruments b. Gain on Foreign Exchange (FOREX) c. Gain on Sale of Investments d. Gain on Sale of Investment Property e. Gain on Sale of Property, Plant and Equipment f. Gain on Initial Recognition of Biological Assets g. Gain on Sale of Biological Assets h. Gain from Changes in Fair Value Less Cost to Sell of Biological Assets Due to Physical Change i. Gain from Changes in Fair Value Less Cost to Sell of Biological Assets Due to Price Change j. Gain from Initial Recognition of Agricultural Produce k. Gain on Sale of Intangible Assets l. Reversal of Impairment Losses m. Other Gains Section 41. Method of Accounting for Revenues. The accrual method of accounting revenues shall be used to record all revenues and receipts accruing to the LGU. The LGU shall recognize the revenue and the asset in respect of taxes when the taxable event occurs and the asset recognition criteria are met. For business and service revenues and other receipts, the asset and the revenue shall be recognized when services are rendered and it is probable that the economic benefits or service potential associated with the transaction will flow to the entity and the amount of revenue can be measured reliably. Interest income earned as at the financial statement date shall take into account the effective yield on the asset. Section 42. Basis of Recording Real Property Tax/Special Education Tax. Real Property Tax Receivable/Special Education Tax Receivable shall be established at the beginning of the year based on Real Property Tax Account Register/Taxpayer’s Index Card. At the beginning of the year, the Treasurer shall officially furnish the Chief Accountant list showing the name of taxpayers and the amount due and collectible for the current year. Based on the list, the Local Accountant shall draw a Journal voucher (JV) to record Real Property Tax Receivable/Special Education Tax Receivable and the corresponding income accounts. Section 43. Discount on Real Property Tax/Special Education Tax. Discounts for advance and prompt payment of Real Property Tax and the Special Education Tax 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 special education tax. Unallocated discounts on advance payments shall be presented as deduction to the Deferred Real Property Tax or Deferred Special Education Tax. Section 44. Fines and Penalties on Real Property Tax/Special Education Tax. Fines and penalties on real property tax/special education tax shall be recognized as income upon collection. 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. Section 45. Share from National Taxes. Shares from National Taxes represent shares of the LGU from internal revenue taxes collected, incremental collection from value added tax, utilization and development of the national wealth in the LGU’s respective territorial jurisdiction, tobacco excise tax and economic zones. Revenues from these sources are recognized upon receipt of the Authority to Debit Account (ADA) from the Bureau of Treasury and receipt of payments of agencies (in case of agencies directly paying to the LGU e.g. in case of hydro power plants and locators in economic zones) and credited to the appropriate income account. Section 46. Service and Business Income. Business and Service Income are revenues from exchange transactions. Revenue is recognized once services are rendered and when it is probable that future economic benefits or service potential will flow to the entity and these benefits can be measured reliably. Revenue from sale of goods shall be recognized when all of the following conditions have been satisfied: a. the entity has transferred to the purchaser the significant risks and rewards of ownership of the goods; b. The entity retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; c. The amount of revenue can be measured reliably; d. It is probable that the economic benefits or service potential associated with the transaction will flow to the entity; and e. The costs incurred or to be incurred in respect of the transaction can be measured reliably. Revenue from rendering of services shall be recognized when the outcome of a transaction involving the rendering of services can be estimated reliably, revenue shall be recognized by reference to the stage of completion of the transaction at the reporting date. The outcome of a transaction can be estimated reliably when all of the following conditions are satisfied: a. The amount of revenue can be measured reliably; b. It is probable that the economic benefits or service potential associated with the transaction will flow to the entity; c. The stage of completion of the transaction at the reporting date can be measured reliably; and d. The costs incurred for the transaction and the costs to complete the transaction can be measured reliably. The appropriate income account shall be credited to record the specific business and service revenue transactions. Section 47. Rent Income. These are income earned from use of government property/facilities under operating lease. The revenue is recognized on a straight-line basis over the lease term irrespective of when the payments are due unless another systematic basis is more representative of the time pattern in which benefits derived are diminished. In case of contingent rent which is a portion of the lease payments that is not fixed in amount, but based on the future amount of a factor that changes other than with the passage of time shall also be recognized as rent income. Section 48. Dividend Income. These are distributions of surpluses to holders of equity investments in proportion to their holdings of a particular class of capital. Revenue shall be recognized when the entity’s right to receive payment is established. Section 49. Interest Income. Interest refers to the charges for the use of cash or cash equivalents, or amounts due to the entity. Revenue from interest shall be recognized on a time proportion basis that takes into account the effective yield on the asset. Section 50. Service Concession Revenues. Service concession revenue is the recognized revenue to reduce the unearned revenue set up upon the recognition of the asset constructed or build by the operator under the grant of a right to the operator model of service concession arrangements Section 51. Other Service Concession Revenue. Other revenues or payments received by the grantor from the operator on service concession arrangements in addition to the service concession asset provided by the operator. Section 52. Lease Revenue. Revenues earned from finance leases. Revenue shall be recognized upon collection of the finance lease receivables and/or the passage of appropriate period as it is earned for the recognized deferred finance lease revenue. Section 53. Accounting for Lease Revenue. This is recognized upon collection of the finance lease receivables and/or the passage of appropriate period as it is earned for the recognized deferred finance lease revenue. Section 54. Transfers, Assistance and Subsidy. Transfers represent receipts of the LGU counterpart or equity share, the unspent appropriations for Disaster Risk Reduction and Mitigation Fund, transfers from national government agencies and other local government units. Assistance and subsidy represent the amount of funds/assets transferred from the National Government, Local Government Units, Government Owned and/or Controlled Corporations without specific purpose. Likewise, these are financial assistance from other funds, General Fund Proper/other special accounts and other local economic enterprises. Section 55. Shares, Grants and Donations. Shares represent LGU share from the income from operations of PAGCOR and PCSO. These are recognized as income upon receipt of the funds. Grants and donations refer to aids from the private sector or international institutions without specific purpose. The aid or donation may be in cash and in kind. Donations in cash shall be recognized in Philippine currency. Receipts in foreign currency shall be converted into Philippine currency at the date of receipt. Aids or donations in kind shall be recognized at fair value of the in kind donations upon the transfer of the legal title. Grants from concessionary loans is the non-exchange revenue recognized when the LGU secure borrowings at below market terms. This is the difference between the loan proceeds and the fair value of the loan on initial recognition. This grant is a paper income, thus, not considered for budget purposes. Section 56. Accounting for the grant component of concessionary loans. The grant component is the difference between the loan proceeds and the fair value of the loan on initial recognition and it is recognized as Grants from Concessionary Loans. Section 57. Gain. Gain is the difference between the fair value of the assets and the carrying cost of the asset. The gain may be a paper income or an actually realized income. Gains from sale of the following assets are actually realized income and are recognized as of the transaction date: a. Investments b. Investment Property c. Property, Plant and Equipment d. Biological Assets e. Intangible Assets On the other hand, the following gains are recognized as at the reporting date in the process of the revaluation of the corresponding assets concerned and considered as paper income, thus, not considered for budgeting purposes: a. Gain from Changes in Fair Value of Financial Instruments – computed by comparing the carrying value with the fair value of the financial instruments, if the fair value exceeds the carrying value a gain is recognized. b. Gain on Foreign Exchange (FOREX)- computed by comparing the foreign exchange rate with the carrying value of the foreign currency as at the reporting date. If the rate is higher than the carrying value a gain on foreign exchange is recognized. c. Gain on Initial Recognition of Biological Assets d. Gain from Changes in Fair Value Less Cost to Sell of Biological Assets Due to Physical Change- computed by comparing the fair value of the existing group of biological assets recognized in the last report less cost to sell with the same fair value of the same group biological assets less cost to sell as at the reporting date, plus the changes in the fair value of new additions e. Gain from Changes in Fair Value Less Cost to Sell of Biological Assets Due to Price Change is computed by comparing the fair value of the biological assets inventory at the last reporting date with the fair value as at the current revaluation date all less the cost to sell. If the current net fair value exceeds a gain is recognized. f. Gain from Initial Recognition of Agricultural Produce g. Reversal of Impairment Losses is the increase in the fair value of the asset Section 58. Other Receipts. Other receipts of the local government units shall be comprised of, but not limited to, the following: a. Borrowings b. Sale of Property, Plant and Equipment c. Refund of Cash Advances d. Receipt of Performance/Bidders’ Bonds Section 59. 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 directly 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 Voucher taking up the transaction. Section 60. 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. Section 61. Refund of Cash Advances. Cash advances for official travel shall be taken up as Advances to Officers and Employees. Refunds made shall be credited to the Advances account previously set up. Cash advances for salaries and wages shall be recorded as debits to the account Advances for Payroll Fund. Any refund made shall be credited to this account. Section 62. Receipt of Performance Bonds. Performance bond posted by contractor or supplier to guaranty full and faithful performance of 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 shall be recorded in the books under the Guaranty/Security Deposits Payable account. In case of surety bond, an acknowledgment receipt shall be issued by the authorized official. Section 63. Reporting for Collections and Deposits. Collectors/Tellers shall issue a receipt to acknowledge collections made. The receipt may be 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. The RCD of the local treasurer shall include the validated deposit slips. In the case of collectors assigned to the field, including deputized barangay collectors for collections made for the city/municipality, where travel time from their places of assignment to the Treasurer’s 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. Section 64. 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. Section 65. Designation of Liquidating Officers. The Treasurer may designate liquidating officers from among the collectors/tellers whenever necessary. a. Collectors/Tellers shall turn over their collections to their designated liquidating officer. The RCD shall 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. The liquidating officer shall acknowledge the collections received by accomplishing the appropriate part of the RCD submitted by the collectors/tellers. He 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. c. 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 the 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. Section 66. 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. Section 67. 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. Section 68. 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 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. D. DISBURSEMENTS Section 70. Disbursements. Disbursements refer to the settlement of government payables/obligations by cash or by check or by Authority to Debit Account (ADA). Disbursements are made for the following expense classifications: a. Personnel Services (PS) b. Maintenance and Other Operating Expenses (MOOE) c. Financial Expenses (FE) d. Capital Outlays (CO) All disbu

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