Page |1 Chapter 3 The Government Accounting Process PROBLEM 3-1: TRUE OR FALSE 1. TRUE 2. TRUE 3. FALSE 4. TRUE 5. TRUE 6. TRUE 7. TRUE 8. FALSE 9. TRUE 10. FALSE PROBLEM 3-2: MULTIPLE CHOICE 1. B 2. D 3. A 4. B 5. A 6. D 7. C 8. A 9. B 10. A Page |2 PROBLEM 3-3: MULTIPLE CHOICE 1. D 2. D 3. C 4. B 5. C 6. D 7. B 8. B 9. D 10. D PROBLEM 3-4: MULTIPLE CHOICE 1. A 2. C 3. A Solution: Subsidy from NG (NCA) Subsidy from NG (TRA) Unused NCA Net Financial Assistance/Subsidy 667,000 4. C Solution: Revenue Expenses 290,000 (885,000) Surplus (Deficit) from operations Subsidy from NG (NCA) Subsidy from NG (TRA) Unused NCA Net Financial Assistance/Subsidy Surplus (Deficit) for the period 625,000 48,000 (6,000) (595,000) 750,000 140,000 (43,000) 847,000 252,000 Page |3 5. A Solution: Adjusted Trial Balance (Dr. & Cr.) Statement of Financial Position (Dr.) Statement of Financial Performance (Dr.) Statement of Financial Position (Cr.) Surplus (Deficit) for the period 6. C 7. C 8. C 9. A 10. C 2,765,000 (1,880,000) 885,000 1,137,000 252,000 Page |4 PROBLEM 3-5: BASIC RECORDING DRILLS Solutions: a. Recording in the Registry of Appropriations and Allotments (RAPAL). b. Recording in the RAPAL and appropriate Registries of Allotments, Obligations and Disbursements (RAOD) maintained by object of expenditure. c. Recording in RAOD and Obligation Request and Status (ORS). d. Journal entry: Date Cash-Modified Disbursement System (MDS), Regular Subsidy from National Government 850,000 850,000 To recognize receipt of NCA from DBM e. Journal entry: Dat Salaries and Wages, Regular e Personal Economic Relief Allowance (PERA) Due to BIR Due to GSIS Due to Pag-IBIG Due to PhilHealth Due to Officers and Employees 450,000 50,000 125,00 0 25,00 0 20,000 12,00 0 318,00 0 To recognize payable to officers and employees upon approval of payroll f. Journal entry: Advances for Payroll Cash-Modified Disbursement System (MDS), Regular Date To recognize grant of cash advance for payroll 318,000 318,000 Page |5 g. Journal entry: Date Due to Officers and Employees Advances for Payroll 318,000 318,000 To recognize liquidation of Payroll Fund h. Journal entry: Date Office Supplies Inventory Accounts Payable 200,000 200,000 To recognize delivery of office supplies i. Journal entry: Accounts Payable Due to BIR Cash – Modified Disbursement System (MDS), Regular Date 180,000 10,000 170,000 To recognize payment of accounts payable j. Journal entry (in the entity’s books): Cash-Tax Remittance Advice Subsidy from National Government Date 135,000 135,000 To recognize the constructive receipt of NCA for TRA Date Due to BIR Cash-Tax Remittance Advice 135,000 135,000 To recognize constructive remittance of taxes withheld to the BIR through TRA k. Journal entry: Date Due to GSIS Due to Pag-IBIG Due to PhilHealth 25,000 20,000 12,000 Page |6 Cash-Modified Disbursement System (MDS), Regular 57,000 To recognize remittance to GSIS, Pag-IBIG and PhilHealth l. Journal entry: Accounts receivable Power Supply System Fees Date 200,000 200,000 To recognize billing of income m. Journal entry: Date Cash – Collecting Officers Accounts Receivable 200,000 200,000 To recognize collection of billed income Date Cash-Treasury/Agency Deposit, Regular Cash – Collecting Officers 200,000 200,000 To recognize remittance of income to BTr n. Journal entry: Date Subsidy from National Government Cash-Modified Disbursement System (MDS), Regular 305,000 305,000 To recognize reversion of unused NCA Cash-Modified Disbursement System (MDS), Regular Receipt of 850,00 NCA 0 318,00 0 170,00 0 57,00 Advances for payroll Payment of accounts Remittances to GSIS, Page |7 0 305,00 0 Pag-IBIG, & PhilHealth end o. Unreleased appropriation: (1,000,000 Appropriation – 980,000 Allotment) = 20,000 p. Unobligated allotment: (980,000 Allotment – 880,000 Obligations) = 100,000 q. “Not Yet Due and Demandable” Obligations (880,000 Obligations – 500,000 gross compensation – 200,000 purchase of office supplies) = 180,000 Page |8 PROBLEM 3-6: BASIC RECORDING DRILLS Solutions: 1. Journal entry Date Cash-Modified Disbursement System (MDS), Regular Subsidy from National Government 1,000,00 0 1,000,00 0 To recognize receipt of NCA from DBM 2. Journal entry (in the entity’s books): Date Cash-Tax Remittance Advice Subsidy from National Government 100,000 100,000 To recognize the constructive receipt of NCA for TRA Date Due to BIR Cash-Tax Remittance Advice 100,000 100,000 To recognize constructive remittance of taxes withheld to the BIR through TRA 3. Recording in the RAPAL and appropriate Registries of Allotments, Obligations and Disbursements (RAOD) maintained by object of expenditure. 4. Recording in the Registry of Appropriations and Allotments (RAPAL). 5. Recording in RAOD and Obligation Request and Status (ORS). 6. Recording in RAOD and Obligation Request and Status (ORS). Page |9 7. Journal entry: Date Accounts receivable Affiliation Fees 250,000 250,000 To recognize billing of income Date Cash – Collecting Officers Accounts Receivable 200,000 200,000 To recognize collection of billed income Date Cash-Treasury/Agency Deposit, Regular Cash – Collecting Officers 200,000 200,000 To recognize remittance of income to BTr 8. Journal entry: Date Subsidy from National Government Cash-Modified Disbursement System (MDS), Regular 50,000 50,000 To recognize reversion of unused NCA 9. Journal entry: Date Office Equipment Accounts Payable 100,000 100,000 To recognize delivery of office equipment 10. Journal entry: Date Accounts Payable Due to BIR Cash – Modified Disbursement System (MDS), Regular To recognize payment of accounts payable 60,000 3,000 57,000 P a g e | 10 PROBLEM 3-7: WORKSHEET PREPARATION Solutions: Requirement (a): Recordings a. The appropriation is posted (recorded) in the Registry of Appropriations and Allotments (RAPAL). b. The allotment is posted (recorded) in the Registry of Appropriations and Allotments (RAPAL) and Registries of Allotments, Obligations and Disbursements (RAOD). c. The obligations are recorded in the Obligation Request and Status (ORS) and Registries of Allotments, Obligations and Disbursements (RAOD). d. Journal entry Date Cash-Modified Disbursement System (d) (MDS), Regular Subsidy from National Government 430,000 430,000 To recognize receipt of NCA from the DBM e. Journal entries (e.1) Salaries and Wages, Regular Personal Economic Relief Allowance (PERA) Due to BIR Due to GSIS Due to Pag-IBIG Due to PhilHealth Due to Officers and Employees 70,000 10,000 18,000 4,000 1,000 2,000 55,000 To recognize payable to officers and employees upon approval of payroll (e.2) Advances for Payroll Cash-Modified Disbursement System (MDS), Regular 55,000 55,000 P a g e | 11 To recognize grant of cash advance for payroll (e.3) Due to Officers and Employees Advances for Payroll 55,000 55,00 0 To recognize liquidation of Payroll Fund f. (f.1) Journal entries Office Equipment Accounts Payable 200,000 200,000 To recognize delivery of office equipment (f.2) Depreciation-Machinery and Equipment Accumulated Depreciation – O.E. 38,000 38,000 To recognize depreciation of office equipment g. Journal entry (g) Accounts Payable Due to BIR Cash – Modified Disbursement System (MDS), Regular 200,000 12,000 188,000 To recognize payment of accounts payable h. Journal entry (h) Office Supplies Inventory Due to BIR Cash – Modified Disbursement System (MDS), Regular 100,000 5,000 95,000 To recognize delivery of office supplies i. (i) Journal entry Office Supplies Expense Office Supplies Inventory To record the issuance of office supplies to end users 90,000 90,000 P a g e | 12 j. Journal entry Advances to Officers and Employees Cash – Modified Disbursement System (MDS), Regular (j.1) 20,000 20,000 To recognize grant of cash advance for travel (j.2) Traveling Expenses - Local Advances to Officers and Employees 17,000 17,000 To recognize liquidation of cash advance for travel (j.3) Cash – Collecting Officers Advances to Officers and Employees 3,000 3,000 To recognize refund of excess cash advance for travel (j.4) Cash – Treasury/Agency Deposit, Regular Cash – Collecting Officers 3,000 3,000 To recognize remittance of the refund of excess cash advance for travel k. Journal entry (k.1) Cash – Collecting Officers Permit fees 40,000 40,000 To recognize collection of unbilled service income (k.2) Cash-Treasury/Agency Deposit, Regular Cash – Collecting Officers 30,000 30,000 To recognize remittance of income to the BTr l. (l) Journal entry Water Expenses 5,000 P a g e | 13 Electricity Expenses Due to BIR Cash – Modified Disbursement System (MDS), Regular 10,000 2,000 13,000 To recognize issuance of MDS checks as payment for expenses m. Journal entry (m.1) Cash-Tax Remittance Advice Subsidy from National Government 37,000 37,000 To recognize the constructive receipt of NCA for TRA (m.2) Due to BIR Cash-Tax Remittance Advice 37,000 37,000 To recognize constructive remittance to BIR of taxes withheld through TRA n. Journal entry (n) Due to GSIS Due to Pag-IBIG Due to PhilHealth Cash-Modified Disbursement System (MDS), Regular To recognize remittance to GSIS, Pag-IBIG and PhilHealth 4,000 1,000 2,000 7,000 P a g e | 14 Requirement (b): Posting in the ledger P a g e | 15 P a g e | 16 Requirement (c): Unadjusted Trial Balance Accounts Debit Credit Cash - Collecting Officers Cash-Treasury/Agency Dep., Reg. 10,000 Cash-MDS, Regular 52,000 Cash-Tax Remittance Advice Office Supplies Inventory Office Equipment Accumulated Depreciation - Equipment 33,000 10,000 200,000 38,000 Advances for Payroll - Advances to Officers and Employees - Accounts Payable Due to Officers and Employees - Due to BIR - Due to GSIS Due to Pag-IBIG Due to PhilHealth - Accumulated Surplus (Deficit) - Permit Fees Subsidy from NG Salaries and Wages, Regular PERA Travelling Expenses - Local 40,000 467,000 70,000 10,000 17,000 Office Supplies Expense 90,000 Water Expenses Electricity Expenses 5,000 10,000 Depreciation-Machinery & Equipment Totals 38,000 545,000 545,000 P a g e | 17 Requirement (d): Adjusting Entry (AJE) Subsidy from National Government Cash-Modified Disbursement System (MDS), Regular To recognize reversion of unused NCA 52,000 52,000 P a g e | 18 Requirement (e): Worksheet P a g e | 19 Requirement (f): Closing entries (CL1 ) Accumulated Surplus/(Deficit) Cash-Treasury/Agency Deposit, Regular 33,000 33,000 To recognize closing of cash deposit account (CL2 ) Permit Fees Subsidy from National Government Salaries and Wages, Regular PERA Travelling Expenses - Local Office Supplies Expense Water Expenses Electricity Expenses Depreciation-Mac. & Equipt. Revenue and Expense Summary To recognize closing of income and expense accounts 40,000 415,000 70,000 10,000 17,000 90,000 5,000 10,000 38,000 215,000 P a g e | 20 (CL3 ) Revenue and Expense Summary 215,000 Accumulated Surplus/(Deficit) To recognize closing of revenue and expense summary 215,000 P a g e | 21 PROBLEM 3-8: WORKSHEET PREPARATION Solutions: Requirement (1): Recordings a. The appropriation is posted (recorded) in the Registry of Appropriations and Allotments (RAPAL). b. The allotment is posted (recorded) in the Registry of Appropriations and Allotments (RAPAL) and Registries of Allotments, Obligations and Disbursements (RAOD). c. The obligations are recorded in the Obligation Request and Status (ORS) and Registries of Allotments, Obligations and Disbursements (RAOD). d. Journal entry Date Cash-Modified Disbursement System (d) (MDS), Regular Subsidy from National Government 1,050,00 0 1,050,00 0 To recognize receipt of NCA from the DBM e. Journal entries (e.1) Salaries and Wages, Regular Personal Economic Relief Allowance (PERA) Due to BIR Due to GSIS Due to Pag-IBIG Due to PhilHealth Due to Officers and Employees 380,000 20,000 90,000 30,000 20,000 10,000 250,00 0 To recognize payable to officers and employees upon approval of payroll (e.2) Advances for Payroll Cash-Modified Disbursement System (MDS), Regular To recognize grant of cash advance for 250,000 250,00 0 P a g e | 22 payroll P a g e | 23 (e.3) Due to Officers and Employees Advances for Payroll 250,000 250,00 0 To recognize liquidation of Payroll Fund f. (f) Journal entry Office Equipment Accounts Payable 320,000 330,000 To recognize delivery of office equipment g. Journal entry (g) Accounts Payable Due to BIR Cash – Modified Disbursement System (MDS), Regular 320,000 20,000 300,000 To recognize payment of accounts payable h. Journal entry (h) Office Supplies Inventory Accounts Payable 150,000 150,000 To recognize delivery of office supplies i. (i) Journal entry Accounts Payable Due to BIR Cash – Modified Disbursement System (MDS), Regular To recognize payment of accounts payable 120,000 10,000 110,000 P a g e | 24 j. (j) Journal entry Water Expenses Electricity Expenses Telephone Expenses Janitorial Expenses Security Expenses Due to BIR Cash – Modified Disbursement System (MDS), Regular 20,000 60,000 40,000 80,000 100,000 20,000 280,000 To recognize issuance of MDS checks as payment for expenses k. Journal entry (k) Office Supplies Expense Office Supplies Inventory 130,000 130,000 To record the issuance of office supplies to end users l. (l) Journal entry Accounts receivable Waterworks System Fees 240,000 240,000 To recognize billing of income m. Journal entry (m.1 Cash – Collecting Officers ) Accounts receivable 200,000 200,000 To recognize collection of current year’s billed income (m.2 ) Cash-Treasury/Agency Deposit, Regular Cash – Collecting Officers 200,000 200,000 To recognize remittance of income to the BTr n. Journal entry (n) Cash-Treasury/Agency Deposit, Regular Tax on Delivery Vans and Trucks 50,000 50,000 P a g e | 25 To recognize collection and remittance of income to BTr through Authorized Government Depository Banks (AGDB) o. Journal entry (o.1) Cash-Tax Remittance Advice Subsidy from National Government 160,000 160,000 To recognize the constructive receipt of NCA for TRA (o.2) Due to BIR Cash-Tax Remittance Advice 160,000 160,000 To recognize constructive remittance to BIR of taxes withheld through TRA p. Journal entry (p) Due to GSIS Due to Pag-IBIG Due to PhilHealth Cash-Modified Disbursement System (MDS), Regular To recognize remittance to GSIS, Pag-IBIG and PhilHealth 34,000 22,000 11,000 67,000 P a g e | 26 Requirement (2): Posting to the Ledger P a g e | 27 P a g e | 28 P a g e | 29 Requirement (3): Unadjusted Trial Balance Accounts Cash - Collecting Officers Cash-Treasury/Agency Dep., Reg. Cash-MDS, Regular Cash-Tax Remittance Advice Accounts Receivable Office Supplies Inventory Buildings Accumulated Depreciation - Buildings Office Equipment Accumulated Depreciation Equipment Advances for Payroll Accounts Payable Due to Officers and Employees Due to BIR Due to GSIS Due to Pag-IBIG Due to PhilHealth Accumulated Surplus (Deficit) Tax on Delivery Vans and Trucks Waterworks System Fees Subsidy from NG Salaries and Wages, Regular PERA Office Supplies Expense Water Expenses Electricity Expenses Telephone Expenses Janitorial Expenses Security Expenses Totals Debit Credit 30,000 250,000 43,000 120,000 20,000 800,000 650,000 660,000 180,000 90,000 333,000 50,000 240,000 1,210,000 380,000 20,000 130,000 20,000 60,000 40,000 80,000 100,000 2,753,000 2,753,000 P a g e | 30 Requirement (4): Adjusting Journal Entries (AJE1.1 ) Depreciation-Buildings & Other Structures Accumulated Depreciation – Bldgs. 30,000 30,000 To recognize depreciation of buildings (AJE1.2 ) Depreciation-Machinery and Equipment Accumulated Depreciation – O.E. 20,000 20,000 To recognize depreciation of office equipment (AJE2) Impairment Loss – Loans and Receivables Allowance for Impairment – A/R 5,000 5,000 To recognize loss allowance on accounts receivable (AJE3) Subsidy from National Government Cash-Modified Disbursement System (MDS), Regular To recognize reversion of unused NCA Requirement (5): Worksheet 43,000 43,000 P a g e | 31 P a g e | 32 Requirement (6): Closing entries (CL1 ) Accumulated Surplus/(Deficit) Cash-Treasury/Agency Deposit, Regular 250,000 250,00 0 To recognize closing of cash deposit account (CL2 ) Tax on Delivery Vans and Trucks Waterworks System Fees Subsidy from National Government Salaries and Wages, Regular PERA Office Supplies Expense Water Expenses Electricity Expenses Telephone Expenses Janitorial Expenses Security Expenses Depreciation-Bldgs. Depreciation-Mac. & Equipt. Impairment Loss – L/R Revenue and Expense Summary 50,000 240,000 1,167,00 0 To recognize closing of income and expense accounts (CL3 ) Revenue and Expense Summary Accumulated Surplus/(Deficit) To recognize closing of revenue and expense summary 380,00 0 20,000 130,00 0 20,000 60,000 40,000 80,000 100,00 0 30,000 20,000 5,000 572,00 0 572,000 572,00 0 P a g e | 33 Requirement (7): Statement of Financial Position ENTITY A STATEMENT OF FINANCIAL POSITION (REGULAR AGENCY FUND) AS AT DECEMBER 31, 20X1 Note ASSETS s Current Assets Cash and Cash Equivalents Receivables 1 30,000 115,000 Inventories 20,000 Total Current Assets 165,000 Noncurrent Assets Property, Plant and Equipment 2 580,000 Total Noncurrent Assets 580,000 TOTAL ASSETS 745,000 Current Liabilities Financial Liabilities Total Current Liabilities 90,000 90,000 TOTAL LIABILITIES 90,000 TOTAL ASSETS less TOTAL LIABILITIES NET ASSETS/EQUITY 655,000 P a g e | 34 Accumulated Surplus/(Deficit) TOTAL NET ASSETS/EQUITY 655,000 665,000 P a g e | 35 Requirement (8): Statement of Financial Performance ENTITY A STATEMENT OF FINANCIAL PERFORMANCE (REGULAR AGENCY FUND) FOR THE YEAR ENDED DECEMBER 31, 20X1 REVENUE Tax revenue Service and Business Income TOTAL REVENUE Less: CURRENT OPERATING EXPENSES Personnel Services Maintenance and Other Operating Expenses Non-cash Expenses TOTAL CURRENT OPERATING EXPENSES Notes 50,000 240,000 290,000 3 4 5 400,000 430,000 55,000 885,000 SURPLUS/ (DEFICIT) FROM CURRENT OPERATIONS (595,000) Net Financial Assistance/Subsidy 1,167,000 SURPLUS/ (DEFICIT) FOR THE PERIOD 572,000 P a g e | 36 Requirement (9): Notes to the Financial Statements ENTITY A NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 20X1 Note 1: Receivable This account consists of the following: Accounts Receivable Allowance for Impairment - A/R Net 120,000 (5,000) 115,000 Note 2: Property, Plant and Equipment This account consists of the following: Buildings Office Equipment Total Cost 800,000 660,000 1,460,000 Accumulated Depreciation - Buildings Accumulated Depreciation - Equipment Total Accumulated Depreciation 680,000 200,000 880,000 Property, Plant and Equipment, net 580,000 Note 3: Personnel Services This account consists of the following: Salaries and Wages, Regular PERA Personnel Services 380,000 20,000 400,000 P a g e | 37 Note 4: Maintenance and Other Operating Expenses This account consists of the following: Office Supplies Expense Water Expenses Electricity Expenses Telephone Expenses Janitorial Expenses Security Expenses Maintenance and Other Operating Expenses 130,000 20,000 60,000 40,000 80,000 100,000 430,000 Note 5: Non-cash Expenses This account consists of the following: Depreciation-Buildings & Other Structures Depreciation-Machinery and Equipment Impairment Loss – Loans and Receivables Non-cash Expenses 30,000 20,000 5,000 55,000 P a g e | 38 PROBLEM 3-9: FOR CLASSROOM DISCUSSION Solutions: a. Recording in the Registry of Appropriations and Allotments (RAPAL). No journal entry yet. b. Recording in the RAPAL and appropriate Registries of Allotments, Obligations and Disbursements (RAOD) maintained by object of expenditure. No journal entry yet. c. Recording in RAOD and Obligation Request and Status (ORS). No journal entry yet. d. Journal entry: Date Cash-Modified Disbursement System (MDS), Regular Subsidy from National Government 325M 325M To recognize receipt of NCA from DBM e. Journal entry: Dat Salaries and Wages, Regular e Personal Economic Relief Allowance (PERA) Due to BIR Due to GSIS Due to Pag-IBIG Due to PhilHealth Due to Officers and Employees 280M 20M 75M 15M 15M 8M 187M To recognize payable to officers and employees upon approval of payroll Updating of ORS. f. Journal entry: Advances for Payroll Cash-Modified Disbursement System (MDS), Regular Date To recognize grant of cash advance 187M 187M P a g e | 39 for payroll Updating of ORS and RAOD. g. Journal entry: Date Due to Officers and Employees Advances for Payroll 187M 187M To recognize liquidation of Payroll Fund h. Journal entry (in the entity’s books): Date Cash-Tax Remittance Advice Subsidy from National Government 75M 75M To recognize the constructive receipt of NCA for TRA Date Due to BIR Cash-Tax Remittance Advice 75M 75M To recognize constructive remittance of taxes withheld to the BIR through TRA i. Journal entry: Due to GSIS Due to Pag-IBIG Due to PhilHealth Cash-Modified Disbursement System (MDS), Regular Date 15M 15M 8M 38M To recognize remittance to GSIS, Pag-IBIG and PhilHealth The ORS and RAOD are updated for the payments above. j. Journal entry: Accounts receivable Rent/Lease income Date 700M 700M To recognize billing of income k. Journal entry: Date Cash – Collecting Officers 550M P a g e | 40 Accounts Receivable 550M To recognize collection of billed income Date Cash-Treasury/Agency Deposit, Regular Cash – Collecting Officers 550M 550M To recognize remittance of income to BTr l. Journal entry: Subsidy from National Government Cash-Modified Disbursement System (MDS), Regular Date 100M 100M To recognize reversion of unused NCA Cash-Modified Disbursement System (MDS), Regular Receipt of NCA 325M 187 M 38 M Advances for payroll Remittances to GSIS, Pag-IBIG, & PhilHealth 100 M end P a g e | 41