Chapter 23

Problem
Assume the following transaction for a National Government Agency: (000,000s omitted)

Transactions National Government Agency Books Dr. Cr.

1. Receipt of Allotment Memorandum entry in
for: RAOCO
Personal Services P 2,460 RAOMO
(PS).. RAOPS
Maintenance and RAOFE
Other Operating 2,400
Expenses (MOOE) 10,260
. 440
Capital outlay (CO)
..
Financial Expenses
(FE)

P15,600
2. Receipt of Notice of Cash National Treasury Modified
Cash Allocation Disbursement 15,600
(NCA) from DBM- P15,600 System.....
Subsidy Income from National 15,600
Government

Personal Services

3. Obligation for Memorandum entry RAOPS

Personal Services,
P3,000

4. Established a payroll Payroll 2,460

fund which is Fund...
composed of : Cash National Treasury 2,460
Regular P2,880 Modified Disbursement
pay System
Personal Relief 720
Allowance (PERA)
..
P3,600
Less: Deductions:
Withholding 840
tax.......
GSIS Life and
Retirement 360
Premium
PhilHealth 180
premiums.
Pag-ibig 120
premiums
Net P2,460
.
Accordingly, an
amount of P2,460 was
advanced by the
agencys disbursing
officer.
 5. To record liquidation Salaries & Wages Regular 2,880
of cash advances or Payroll 720
payment of salaries. PERA 840
. 360
Due to 180
BIR 120
Due to GSIS ... 2,460
.
Due to PhilHealth.
.
Due to Pag-ibig
.
Payroll
Fund.
6. Remittance of salary Due to 840
deductions (no tax BIR... 360
remittance advice) P12,600 Due to GSIS ... 180
120
Due to PhilHealth 1,500
....
Due to Pag-ibig
......
Cash NT
MDS
7. Obligation for Memorandum entry RAOPS
government share
representing:
Life and retirement
Insurance P 360
180
Philhealth. 120
..
Pag-
ibig..
P 660
8. Recording the Life and Retirement Insurance 360
incurrence of Contribution 180
government share for PhilHealth Contribution 120
applicable salary Expense. 360
deduction. Pag-ibig Contribution 180
Expense 120
Due to
GSIS..
Due to Pag-
Ibig..
Due to
PhilHealth
9. Remittance of Due to 360
government share GSIS 180
for Due to Pag-Ibig 120
applicable salary Due to 660
deduction. PhilHealth.
Cash NT
MDS.

Maintenance and Other Operating Expenses

10. Obligation of rent Memorandum entry RAOMO

for P180
two
years..
11. Payment of two Prepaid 180
years P180 rent... 180
rent.. Cash NT
MDS.
12. Obligation for: Memorandum entry RAOMO
Electricity P360
bill. 60
Telephone
bill..
P420
13. Received the Electricity 360
following bill: expense.. 60
Electricity P360 Telephone expenses 420
bill 60 landline..
Telephone Accounts payable.
bill..
P420
14. Payment of Accounts payable.. 420
electricity Cash NT - 420
and telephone bills. MDS..

15. Obligation for Memorandum entry RAOMO

traveling (local)
expenses of Mr.
Miranda P24
.
16. Grant of cash Advances to Officers & 24
advance to Mr. Alex Employees 24
Miranda for Cash NT -
traveling expense. MDS..
17. Liquidation of cash Travel expenses- local. 22
advance for travel ... 22
of P22 Advances to Officers &
Mr. Alex Miranda... Employees..
18. Adjustment of Memorandum entry RAOMO
obligation for refund
of excess advance
for traveling P2.4
expense
19. Collection of refund Cash collecting 2.4
for excess advance officers.. 2.4
from the foregoing Advances to Officers &
cash advance for Employees..
travel.
20. Deposit of Subsidy Income from National
collection from 2.4
excess Government 2.4
advance to Bureau Cash collecting
of Treasury officers.
21. Issuance of Memorandum entry RAOMO
purchase order
(obligation) for P240
office
supplies.
22. Paid the purchase Office Supplies 240
order less Inventory... 24
withholding tax of P 24 Due to 216
BIR
Cash NT
MDS
23. Issuance of the P168 Office Supplies 168
following office Expense. 168
supplies Office Supplies
.. Inventory.
24. Remittance of Due to 24
withholding tax thru BIR..
TRA (tax remittance Subsidy Income from National 24
advice) Government.
.
25. To record obligation Memorandum entry RAOMO
for the
establishment of
Petty Cash Fund
(PCF) for office
supplies (pens and
pencils not
available in the
stockroom)

26. Establishment of Petty Cash 42

Petty Cash Fund Fund... 42
(PCF) for P42 Cash NT
MOOE.. MDS.
27. Purchase of sign No entry
pens, ball pens,
white board pens,
pencils thru P36
PCF..
28. To record obligation Memorandum entry RAOMO
for request of
replenishment of
the PCF for P36.
29. To record Office Supplies 36
replenishment of Expense. 36
PCF, before the end Cash NT -
of the year. MDS.

Capital Outlay

30. Issuance of Memorandum entry RAOCO

purchase
order (obligation) P120
for
office
equipment
31. Receipt of office Office Equipment.. 120
equipment based on .. 120
invoice/delivery Accounts payable.
receipt.
32. Payment of office Accounts payable.. 120
equipment, with a Due to 12
tax P12 BIR. 108
of.... Cash-NT-
.. MDS...
33. To record obligation Memorandum entry RAOCO
for construction of
a
new building upon P840
signing of
contract
 34. Payment of 15% of Advances to Contractors. 126
contract for Cash NT - 126
mobilization fee MDS
(advances to
contractors)
amounting to
(P840 x 15%) P126
.
35. Receipt of first Construction In Progress 420
progress billing for Buildings 126
construction of new Advances to 294
building: Contractors
50% of P420 Accounts payable..
P840. 126
Less: P294
Recoupment
Net
Amount
36. Payment of first Accounts payable.. 294
progress billings, Due to BIR.. 30
withholding P30 .. 264
tax... Cash NT -
MDS.
37. Presentation of final Construction In Progress 420
billing: 50% of P420 Buildings 420
P840. Accounts payable.
38. Final payment for Accounts payable.. 420
building, Due to BIR.. 42
withholding P42 ... 378
tax Cash NT -
of.. MDS........

39. To close the Buildings 840

Construction In .. 840
Progress Account to Construction In progress
Buildings upon turn- Buildings
over and acceptance
40. To record obligation Memorandum entry RAOCO
for construction of
roads upon signing
of P2,400
contract amounting -
41. To record the receipt Cash Collecting 12
of performance Officer.. 12
bond from (cash or Performance Bonds
certified check) Payable..
contractor P 12
.

If the performance bond is in the form of surety bond, the following entry is required:
To record the receipt Guarantee Deposits..... 12
of performance Performance Bonds Payable............ 12
bond from (cash or
certified check)
contractor P 12

42. To record Due from National Government Agency -

remittance/deposit (BTr) 12
of . 12
performance bond Cash Collecting
 cash to Bureau of Officer.
Treasury (BTr) thru
AGDB (Authorized
Government
Depository Bank)
43. Payment of 15% of Advances to 360
contract for Contractors.. 360
mobilization fee Cash-NT-
(advances to MDS..
contractors)
amounting to
(P2,400 P360
x 15%)
..
44. Receipt of progress Construction in Progress 1,200
billing for Roads 360
construction of Advances to 840
roads, P1,200 Contractors
50% of 360 Accounts payable.
P2,400. P 840
Less:
Recoupment
Net
amount
45. Payment of bill for Accounts payable.. 840
the construction of Due to BIR.. 84
roads: . 120
Accts. Payable.. P 840 Guarantee deposits payable.. 636
Less: Withholding Cash-NT-
84 MDS.
tax.......
10% Retention 120
P 636
(1,200x10%)...
Net
Amount
46. Presentation of final Construction in Progress 1,140
billing for roads Roads 1,140
50% of P1,200 Accounts payable.
P2,400.
Less: Liquidated 60
P 1,140
Damages..
Net Amount
..
47. Final payment for Accounts payable.. 1,140
the construction of Due to BIR.. 114
roads: . 1,026
Accts. Payable.. P 1,140 Cash-NT-
Less: Withholding MDS.
114
tax(P1,140X10%) P 1,026
Net Amount

48. Adjustment of Memorandum entry RAOCO

RAOCO to reduce
original amount of
obligation P60
49. To close the Public Infrastructures 2,340
 Construction In Construction In Progress Roads, etc 2,340
Progress Account to
Public Infrastructures
upon turn-over and
acceptance of the
road project:
Contract P2,400
amount...
Less: Liquidated 60
damages P2,340

Net
Cost
50. To record refund Guarantee Deposits 120
of retention fee for Payable.. 120
the construction of P 120 Cash NT
roads. MDS.
51. To record receipt Cash NT 12
of NCA for release of MDS... 12
performance bond.. P 12 Due from National Government (BTr)
..
52. To record refund Performance bond payable 12
of performance bond. P 12 Cash NT 12
MDS.
If the performance bond is in the form of surety bond, the following entry is required
(instead of No. 51 and 52)
To record the Performance Bonds 12
release of Payable 12
performance Guaranty
bond P 12 Deposits...

53. To record Memorandum entry RAOCO

obligation for
purchase of land and
building upon signing P1,800
of contract..
54. The assessed Land. 1,200
value of the land P1,200 Building 600
amounted to 1,800
Accounts payable.
55. To record the Accounts payable.. 1,800
payment of land and Due to BIR.. 180
building, with tax P 180 .. 1,620
of. Cash NT -
MDS.
56. To record Due to 84
remittance of BIR... 84
withholding tax Cash NT -
without TRA: P 12 MDS.
No. 30
32. 42
No. P 84
36.
No.
38.
Total

57. To record Due to 378

 remittance of BIR..
withholding tax thru Subsidy Income from National 378
TRA: P 84 Government.
No. 114 .
45. 180
No. P 378
47.
No.
55.
Total

58. To record for Memorandum entry RAOCO

obligation for the
general repair of the
building P 840
acquired.
59. To record the Construction Materials 480
receipt of Inventory 480
construction Accounts payable.
materials with the P 480
charge invoice.
60. To record Accounts payable.. 480
payment of Due to 48
materials, with a tax P 48 BIR. 432
of.. Cash NT
. MDS.......
61. To record Construction in Progress 480
issuance of Building 480
materials for the P 480 Construction Materials
construction Inventory..
62. To record Memorandum entry RAOCO
obligation of payroll
in relation to the P 360
general repair

63. To record cash Cash Disbursing Officer.. 324

advance granted to . 324
disbursing officer Cash NT-
(net of P30 P 324 MDS...
withholding tax).
64. To record Construction in Progress (CIP) 360
liquidation of cash Building. 36
advance by Due to 324
Disbursing Officer BIR.
Cash Disbursing
Officer.
65. To record the Building.. 840
transfer of CIP Construction In Progress 840
account to Buildings Building..
account upon
completion of the
general repair.
66. To record Due to 84
remittance of BIR...
withholding tax for Subsidy Income from National 84
materials and labor, Government.
assuming that the .
Notice of Cash
Allocation received
was already reduced
 by TRA: P 48
No. 36
60. P 84
No.
64.
Total

Adjusting Entries
66. Depreciation of the Depreciation expense 6
following equipment.. 18
Equipment P 6 Depreciation expense 6
. 18 buildings.. 18
Buildings P 24 Accumulated depreciation- equipment
. Accumulated depreciation-
Total buildings
.
67. Rent expense for Rent Expense. 90
the year, P150/2 P 90 Prepaid rent... 90
years.
Closing Entries
68. Reversion of the Subsidy Income from National
Unused Subsidy Government 4,386
Income from 4,386
National Cash NT
Government MDS.
representing NCA

69. Close SING to Subsidy Income from National

Income and Government 8,698
Expense Summary 8,698
Income and Expense
Summary.....
70. Close expenses to Income and Expense 7,360
Income and Summary.. 2,880
Expense Summary Salaries and Wages (#5) 720
360
PERA (#5) 180
120
Life and Retirement (#8) 360
60
PhilHEALTH Contr. Exp. (#8) 22
.. 204
Pag-ibig Contr. Exp. (#8) 2,340
6
Electricity expense (#13) 18
90
Telephone (#13)
...
Travel expense (#17)
..
Office supplies expense (#23 &
#29).
Public
Infrastructures...
Depr Exp Equipment (#66)

Depr Exp Bldgs (#66).
..
 Rent expense (#67)
.
71. Close Income and Income and Expense 2,036
Expense Summary Summary.. 2,036
to Retained Retained operating
Operating Surplus surplus.
72. Close Retained Retained Operating 2,036
Operating Surplus to Surplus. 2,036
Government Equity Government
Equity

Multiple Choice Problems

1 b 6. d 11. a 16. d 21. d 26. a 31 b 36. d 41. b
.
2 d 7. a 12. b 17. a 22. c 27. a 32. b 37. b 42. a
.
3 b 8. d 13. c 18. d 23. b 28. b 33. c 38. a 43. c
.
4 c 9. d 14. b 19. a 24. c 29. b 34. b 39. b 44. b
.
5 c 10, b 15, c 20. c 25. b 30. d 35. d 40. b 45. d
.

46. d P58,800,000 = P7,000,000 + P14,000,000 + P25,200,000 + P9,800,000 +

P2,800,000
47. No answer available P121,800,000
Assets:
Current assets P
14,000,000
Investments and fixed assets 126,000,00
0
Other assets ___7,000,00
0
Total assets P147,000,0
00
Less: Liabilities __25,200,00
0
Government Equity P121,800,0
00

48. a
Income P20,000,00
0
Less: Expenses
Personal services 7,000,000
MOOE 3,000,000
Financial expenses 5,000,000
Depreciation ___800,000
Excess of income over expenses P
4,200,000

49. b
I ncome:
Subsidy income from National Government P
 4,000,000
Less: Reversion of unused cash allocation ___500,000 P
3,500,000
Sales P15,000,00
0
Less: Cost of goods sold __4,000,000 11,000,000
Rent income 1,000,000
Interest income 500,000
Gain on sale of assets 2,000,000
Income from government services 8,000,000
Total Income P26,000,00
0
Less: Expenses
Interest expense P 100,000
Depreciation expenses 800,000
Salaries and wages 10,000,000
PERA 200,000
Representation allowances 300,000
Transportation allowances 100,000
Grants and donations 400,000
Rent expense 500,000
Electricity 2,000,000
Telephone charges 800,000
Bank charges ___400,000 _15,600,00
0
Excess of income over expenses P
10,400,000

50. c
Government equity, beginning P10,000,00
0
Retained Operating Surplus:
Current operations P16,000,00
0
Adjustment of prior years __2,000,000 18,000,000
Property, plant and equipment public infrastructures ( 3,000,00
0)
Government equity, ending P
25,000,000