ACCOUNTING: RELATIONSHIP WITH COMMISSION ON AUDIT (COA) Kristina A. Rosales

Government Accounting Under Section 109 of Presidential Decree (PD) no. 1445, defines Government Accounting as one that encompasses the process of analyzing, classifying, summarizing and communicating all transactions that are involved in the receipt and disbursement of all government funds and properties, and interpreting the results thereof. Government Accounting shall aim to produce information concerning past operations and present conditions; provide a basis for guidance for future operations; provide for control of the acts of public bodies and officers in the receipt, disposition and utilization of funds and property; and report on the financial position and the results of operations of government agencies for the information of all persons concerned.”

Relationship with COA The Commission on Audit (COA), under the new 1987 Constitution, promulgated the New Government Accounting System in the Philippines (NGAs) for use by all government agencies which is a simplified set of accounting concepts, guidelines and procedures designed to correct, complete and record in a timely manner all government financial transactions, and produce accurate and relevant financial reports. “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".

New Government Accounting System (NGAS) A new accounting system needs to be developed that would help the different agencies to hit on financial targets, and at the same time be understood by all users of financial reports. The shift to NGAs was made in response to the following need: 1. Adoption of an accounting system that is in conformity with the International Accounting Standards. 2. Computerization of the accounting systems to generate reports that will be easy to understand by the general public. 3. Preparation of regular and routinary financial reports. 4. The use of the generated financial reports as tools of management in decision making.

Objectives of New Government Accounting System 1.Produce information concerning past operations and present conditions; 2.Provide a basis for guidance for future operations; 3.Provide for control of the acts of public bodies and officers in the receipt, disposition and utilization of funds and property; and 4.Report on the financial position and the results of operations of government agencies for the information of all persons concerned.

Accounting Responsibility Fiscal responsibility emanates from the Constitution and its governing laws, rules and promulgation. The mandate as prescribed under the said Constitution of the Philippines calls for the keeping of the general accounts, as well as the promulgation and submission of financial reports that would cover the operations of government.

Accounting Process

1.Collecting and Analyzing of Documents. The first step includes the preparation of business documents, or source documents. A document serves as basis for recording a transaction. 2.Posting in Journal. A journal is a book – paper or electronic – in which transactions are recorded. Transactions are recorded using the double-entry bookkeeping system

3.Ledger Accounts. Also known as Books of Final Entry, the ledger is a collection of accounts that shows the changes made to each account as a result of past transactions, and their current balances. 4.Trial Balance. A trial balance is prepared to test the equality of the debits and credits. All account balances are extracted from the ledger and arranged in one report.

5.Adjustment Entries. Adjusting entries are prepared as an application of the accrual basis of accounting. At the end of the accounting period, some expenses may have been incurred but not yet recorded in the journals. Some income may have been earned but not entered in the books. 6.Adjusted Trial Balance. An adjusted trial balance may be prepared after adjusting entries are made and before the financial statements are prepared. This is to test if the debits are equal to credits after adjusting entries are made.

7.Preparation of Financial Statements. When the accounts are already up-to-date and equality between the debits and credits have been tested, the financial statements can now be prepared. The financial statements are the end- products of an accounting system. 8.Post of Closing Entries. Temporary or nominal accounts, i.e. income statement accounts, are closed to prepare the system for the next accounting period. Temporary accounts include income, expense, and withdrawal accounts. These items are measured periodically.

9.Post-Closing Trial Balance. In the accounting cycle, the last step is to prepare a post- closing trial balance. It is prepared to test the equality of debits and credits after closing entries are made. Since temporary accounts are already closed at this point, the post- closing trial balance contains real accounts only.

Basic Accounting Principles Accrual Principle. Accounting transactions should be recorded in the accounting periods when they actually occur, rather than in the periods when there are cash flows associated with them. Conservatism Principle. This is the concept that you should record expenses and liabilities as soon as possible, but to record revenues and assets only when you are sure that they will occur.

Consistency Principle. Once you adopt an accounting principle or method, you should continue to use it until a demonstrably better principle or method comes along. Cost Principle. A business should only record its assets, liabilities, and equity investments at their original purchase costs. Economic Entity Principle. The transactions of a business should be kept separate from those of its owners and other businesses.

Matching Principle. This is the concept that, when you record revenue, you should record all related expenses at the same time. Materiality Principle. You should record a transaction in the accounting records if not doing so might have altered the decision making process of someone reading the company's financial statements.

Reliability Principle. Only those transactions that can be proven should be recorded. Revenue Recognition Principle. This is the concept that you should only recognize revenue when the business has substantially completed the earnings process. Time Period Principle. Should report the results of its operations over a standard period of time.

Summation The need for timely preparation of financial reports in government is necessary to evaluate the performance of the different agencies of government. The result of the reports would indicate the areas that may still need improvement, as well as come up with the budgetary requirements for these agencies if needed. Public officers are managers of funds, that are entrusted to them by the national government. The financial reports would clearly show if the agencies are achieving what is mandated of them. These reports would also show the extent in the use of agency assets and resources, as well as the need for additional infusion of funds if required The accounting data would show how the funds of government were used. This would also reveal the inflow and outflow of funds and the need for stiffer fund management and control, if necessary.

Output: Liquidation

Liquidation It is the process of winding up of business which normally consists of conversion of assets into cash, payment of liabilities and distribution of remaining funds to shareholders and closing it down as a legal entity. It is the interval of time between dissolution and termination of partnership affairs

Thank You!