Erica Mae G. Rodriguez ACT-101 Government Accounting During our first class, I learned the difference between Government and Business. When we say Governments are not-for-profit and serve the public through tax revenue, while businesses aim for profits and cater to specific customers. Government entities are owned by the public or elected officials, while businesses can be privately or publicly owned. Governments focus on providing public services, while business is focused on private services. Government Accounting encompasses the processes of analyzing, recording, classifying, summarizing, and communicating all transactions involving the receipt and disposition of government funds and property, and interpreting the result thereof. Government accounting has four objectives which are to produce information concerning past operations and present conditions, to provide a basis for guidance for future operations, it also provides for control the acts of public bodies and officers in the receipt, disposition, and utilization of funds and property, and lastly, to report on the financial position and the results of operations of government agencies for the information of all persons connected. Government accounting is also a process of producing information that is used in making economic decisions. It emphasizes the sources and utilization of government funds; and the responsibility, accountability, and liability of entities entrusted with government funds and properties. Government agency refers to any department, bureau, or office of the national government, or any of its branches and instrumentalities, or any political subdivision, as well as any government-owned or controlled corporation, including its subsidiaries, or other selfgoverning board or commission of the government. It is responsible for directly implementing the projects of and performing the functions delegated by the government. And also required by law to have accounting units/ divisions/ departments. The GAM for NGAs provides the principles and procedures to be applied in the financial reporting of government entities. It was promulgated by the COA primarily to harmonize the government accounting standards with international standards. This chapter serves as an introduction to the fundamental principles and objectives of government accounting. It highlights the unique features and challenges faced by governmental entities, such as the need for accountability to taxpayers and the requirement for transparent financial reporting. The chapter provides an overview of the conceptual framework, including the recognition, measurement, and presentation of financial information in government accounting. In the next chapter, I learned that the national budget serves as an estimate of the government's sources and uses of funds within a fiscal year, enabling the promotion of socio-economic objectives. The budget cycle consists of four stages: budget preparation, budget legislation, budget execution, and budget accountability. During the budget preparation stage, the government employs different approaches such as a bottom-up approach or zero-based budgeting. This involves making budget calls, conducting budget hearings, and presenting the finalized budget to the Office of the President for approval. Moving on to the budget legislation stage includes deliberations in the House, Senate, and Bicameral sessions before the President enacts the budget. The approved budget encompasses several components that serve specific purposes. These include new general appropriations, continuing appropriations, supplemental appropriations, automatic appropriations, unprogrammed funds, retained income/funds, revolving funds, and trust receipts. These components ensure the effective allocation of funds based on various needs and circumstances. The budget execution stage focuses on implementing the approved budget. It involves the release of guidelines, allotment of funds, and the incurrence of obligations. To facilitate the disbursement of funds, different forms of disbursement authority are utilized. These include the notice of cash allocation, which authorizes the withdrawal of cash from governmentservicing banks within a specific period. The notice of transfer of allocation allows the transfer of funds between central offices and regional or operating units. Additionally, non-cash availment authority enables agencies to settle their obligations and access proceeds from loans or grants. For agencies with foreign operations, the cash disbursement ceiling permits the use of income collected from Foreign Service Posts to cover operating requirements. Budget accountability is a crucial aspect of government accounting. It involves the preparation and submission of budget accountability reports, performance reviews to evaluate the effectiveness of budget utilization, and audits to ensure compliance with financial regulations and guidelines. Lastly, I learned about responsibility accounting, which provides managers with cost and revenue information that falls within their direct control. This system involves identifying responsibility centers and distinguishing between costs that can be controlled and those that cannot. For the next chapter, which is chapter 3 I have learned about the government accounting process, which involves books of accounts and registries. The books of accounts include journals and ledgers, while the registries are used to monitor the budget. Different types of registries track revenue and receipts, appropriations and allotments, budget utilization and disbursements, and allotments, obligations, and disbursements. The process of incurring obligations is an important aspect of government accounting, which requires the issuance of an Obligation Request and Status (ORS). Adjustments to obligations can be made using the Notice of Obligation Request and Status Adjustment (NORSA). It is essential to note that these obligations are recorded in the registries but not yet in the accounting books until services are rendered or goods are received. Government entities use the term "obligation" differently than business entities, as it refers to an act that binds the government to the payment of a sum of money. The accounting process involves maintaining journals and ledgers to record various transactions, such as cash receipts and disbursements. The Revised Chart of Accounts (RCA) provides a standardized list of accounts used by government entities, ensuring consistency and accurate financial reporting. The government accounting cycle includes stages like appropriation, allotment, the incurrence of obligation, disbursement authority, disbursements, billings, collections, and remittances. Adjusting entries and closing entries are made to account for specific adjustments and transfer balances to relevant accounts. In Chapter 4 of government accounting, I learned about revenue and other receipts. Revenue refers to the income or service potential that increases equity, excluding contributions from owners. It primarily comes from tax and non-tax sources, with taxpayers and corporations being major contributors. There are fundamental principles for revenue, including remitting all revenues to the National Treasury, accounting for money and property as government funds, and issuing official receipts. Different types of funds exist, such as the general fund, special funds, trust or fiduciary funds, revenue funds, depository funds, Special Accounts in the General Fund (SAGF), and Special Purpose Funds (SPFs). Each fund has its regulations and purpose. Revenue can arise from exchange transactions (sales of goods/services and use of assets) and non-exchange transactions (taxes, fines, donations). Recognition and measurement of revenue depend on specific conditions and fair value considerations. Impairment losses and allowances for impairment losses are important in accounting. Uncollectible amounts previously recognized as revenue are treated as expenses. Other receipts include subsidies, refunds, collections made on behalf of another entity, and intra-agency/inter-agency fund transfers. Understanding these concepts enhances knowledge of revenue generation and financial management in government accounting. In Chapter 5, I learned about the disbursement of government funds and the various modes of disbursement. Disbursements involve all payments made in cash, supported by disbursement vouchers or payroll. The fundamental principles for the disbursement of public funds include using resources under the law and for public purposes, ensuring fiscal responsibility, obtaining proper approval for resource utilization, and supporting claims with complete documentation. Disbursements require disbursement authority, which can be obtained through notices of cash allocation, transfer of allocation, tax remittance advice, non-cash availment authority, or cash disbursement ceiling. Several basic requirements and certifications are necessary for disbursements, such as certifying the availability of allotment, charging obligations against available allotment, and ensuring the legality of disbursements. The modes of disbursements include checks, cash, and cashless payments such as advice to debit accounts, electronic modified disbursement system, cashless purchase card system, and tax remittance advice. Checks are used when cash or advice to debit accounts is not feasible, and there are modified disbursement system checks and commercial checks issued by government entities. Cash disbursements include cash advances and payments out of the petty cash fund, which should comply with specific rules regarding purpose, appointed disbursing officers, liquidation, and no encashment or transfer of cash advances. Other modes like advice to debit accounts allow for fund transfers between accounts in the same or different banks, an electronic modified disbursement system enables online disbursements from BTr accounts, and a cashless purchase card system involves the use of credit cards for specific eligible items. Noncash availment authority allows agencies to cover the liquidation of obligations through loans/grants, and tax remittance advice is used for the constructive remittance of withheld taxes or customs duties. It is important to account for disallowances, which are invalidated or disallowed expenditures, and overpayments, which may occur but should be corrected through refunds or appropriate accounting entries. In Chapter 6 of the financial assets section, I have learned the following: A financial instrument creates a financial asset for one entity and a financial liability or equity instrument for another. Financial assets can be cash, equity instruments, contractual rights, or contracts settled in equity instruments. Financial liabilities are contractual obligations to deliver cash or exchange assets. Equity instruments represent residual interest after deducting liabilities. Classification of financial instruments is based on contractual agreement substance. Examples include bank deposits, which create assets for depositors and liabilities for banks. Cash is the most basic instrument and serves as the medium of exchange. Financial assets are initially recognized based on contractual provisions and measured at fair value plus transaction costs. Transaction costs include fees and taxes. The chapter covers cash, receivables, investments, derivatives, and their classifications. Cash equivalents are highly liquid and short-term. Receivables represent claims from other entities. Investments are classified based on their nature. Impairment and derecognition are important considerations. Derivatives derive value from underlying assets or instruments. In Chapter 7 of the inventory section, I have learned that inventories for government and non-profit organizations are initially measured at cost and subsequently measured at the lower of cost and net realizable value for goods held for sale, or the lower of cost and current replacement cost for goods held for distribution. The cost of inventories includes the purchase cost and direct costs incurred in bringing the asset to its intended location and condition while excluding abnormal amounts of wasted materials, labor, production overhead, selling costs, and administrative overheads. The net realizable value represents the estimated selling price minus estimated completion and selling/disposal costs, while the current replacement cost reflects the cost to acquire the asset on the reporting date. Different cost formulas, such as specific identification and weighted average cost, are used based on the nature of the items. Journal entries are made for various inventory categories, and the carrying amount of inventory is recognized as an expense when sold, distributed, exchanged, consumed, or written down to its net realizable value or current replacement cost. The receipt and disposition of inventories involve several steps, including purchase requests, purchase orders, inspection and acceptance reports, recording in stock cards and books of accounts, and the preparation of disbursement vouchers. Additional documents, such as waste materials reports and reports on physical counts, are used for accurate inventory management. This chapter provides comprehensive guidance on inventory measurement, cost formulas, journal entries, expense recognition, and inventory management processes for government and non-profit organizations. In Chapter 8 of our discussion on agriculture, I learned that agricultural activities involve farming, livestock raising, and other processes to produce crops and biological assets. These activities require the management of assets for sale or conversion into agricultural produce. I discovered that agricultural activities have common features, including the ability to undergo a biological transformation, the role of management in facilitating this transformation, and the routine measurement of changes in quantity or quality. Recognizing and measuring assets and agricultural produce in agriculture is crucial, and I now understand that biological assets are measured at fair value less cost to sell, with gains or losses recognized accordingly. If fair value is not determinable, they are measured at cost less depreciation and impairment. Agricultural produce, on the other hand, is initially measured at fair value less costs to sell, and subsequently at the lower of cost and net realizable value. The chapter also emphasized the importance of disclosures, such as reporting gains or losses and providing information about consumable and bearer biological assets, as well as mature and immature biological assets. Overall, this chapter has deepened my understanding of the management, measurement, and reporting requirements for agricultural activities and their associated assets and produce.