DE LEON/ DE LEON/ DE LEON

Celso Dario Ermo Total

Asset P1,613,664 P 358,560 P177,120 P2,149,344

Liabilities 777,600 57,600 - 835,200
Net assets
(capitals) 836,064 P 300,960 P177,120 1,314,144
Celso: (P1,314,144 * 50%) P 657,072
Dario (P1,314,144 * 20%) 262,829
Ermo (P1,314,144 * 30%) 394,243
TOTAL P1,314,144
 Capital Credit Contribution Bonus

Celso P657,072 P 836,064 (178,992)

Dario 262,829 300,960 ( 38,131)

Ermo 394,243 177,120 217,123

Totals P1,314,144 P1,314,144 P -
F: P 324,000 * 1/12 P 27,000 G: P 216,000 * 4/12 P 72,000

432,000 * 6/12 216,000 288,000 * 6/12 144,000

378,000 * 5/12 157,500 324,000 * 2/12 54,000

Average capital P400,500 Ave. Cap. P270,000

6% 6%
Interest P 24,030 Interest P 16,200
 Net Income, P205,920 Flor Grace TOTAL

Interest* P 24,030 P 16,200 P40,230

Salaries 25,920 25,920 51,840
Bonus 10,350 10,350
Balance 62,100 41,400 103,500
Total P122,400 P 83,520 P205,920

Bonus = 10% * (P205,920 – P40,230 - P51,840 - B)= P 10,350

 Flor Grace TOTAL
Initial capital P324,000 P216,000 P 540,000
Addl investment 108,000 108,000 216,000
Capital withdrawal ( 54,000) ( 54,000)
Drawings ( 6,480) ( 6,480) ( 12,960)
Sub-totals P371,520 P317,520 P 689,040
Share in net
income 122,400 83,520 205,920
Capitals,
12/31/17 P493,920 P401,040 P 894,960
 Flor Grace TOTAL
Sub-totals (See Item 5) P 371,520 P317,520 P689,040
Interests 24,030 16,200 40,230
Salaries 25,920 25,920 51,840
Share in net income@ 72,450 41,400 113,850
Capitals, 12/31/17 P 493,920 P401,040 P894,960

@Net income(P205,920–P40,230–P51,840) P113,850

Flor Grace TOTAL
Bonus P10,350 10,350
Balance 62,100 41,400 103,500
Totals P72,450 P41,400 P 113,850
Haidee: (P64,800 * 30%) P 19,440 3,564 P 23,004

Irma : (P32,400 * 30%) 9,720 2,376 12,096

P 29,160 P 5,940 P 35,100
I/R PARTNERS TAC CNA DIFF
Haidee 62,046 64,800 (2,754)
Irma 30,564 32,400 (1,836)
30% Jessa 39,690 35,100 4,590
Total 132,300 132,300 0
 Kiks Leila Mimi Total
Capitals P105,000 P97,500 P225,000 P427,500
Adjustments
(90,000 +
P100,000) 57,000 57,000 76,000 190,000
Adjusted
balances 162,000 154,500 301,000 617,500
Total cash paid
to Kiks (150,500) - - (150,500)

Bonus (11,500) 4,929 6,571 -

Ending Balance - P159,429 P307,571 P467,000
Using SPC: B D O
Total interest P137,700 P 278,100 P 123,300
TPL (P524,700) ( 157,410) ( 262,350) ( 104,940)
Balances P( 19,710) P 15,750 P 18,360
APL (P19,710) 19,710 ( 14,078) ( 5,631)
Free interests P - P 1,671 P 12,729
Using the
Short-cut: B D O
BBL P137,700 P278,100 P123,300 539,100
30% 50% 20%
Cum loss (136,350) (227,250) ( 90,900) (454,500)
Cum cash
paid P 1,350 P 50,850 P32,400 84,600
Fair Value of net assets (P80,000 + P12,000) P 92,000
Par value of shares issued (10,000 shares * P1) 10,000
Amount credited to APIC P 82,000
Equipment per books of JO, 1/1/17 (FV) P200,000

Multiply by 1/3
Each Joint operator’s equal share P 66,667
Less JJJ’s unrealized gain as of 1/01/17
(P15,000 * 1/3) 5,000
Same amount (if computed at cost to JJJ:
(P185,000 * 1/3) P 61,667
Equipment per books of Joint Operation, 1/1/17 P200,000
Accumulated depreciation (200,000/ 10) 20,000
Equipment per books of the JO, 12/31/17 P 180,000
Multiply by 1/3
Each joint operator’s equal share P 60,000
Less JJJ’s unrealized gain as of 12/31/17 4,500
(P5,000 * 90%)
Same amount (if P185,000 * 90%) * 1/3 P55,500
(P 180,000 * 1/3) P60,000
Equipment per books of Joint Operation, 1/1/17 (FV) P200,000
Multiply by 1/3
Equipment in JO in BS of each operator, 1/1/17 P 66,667

Equipment, net per books of Joint

Operation, 12/31/17 (200,000 * .90) P180,000
Multiply by 1/3
Equipment in JO in balance sheet of each
operator, 12/31/17 P 60,000
 TRISHA BELLA

Purch 30,000 57,000 Sales Purch 30,000 54,900 Sales

Exp 3,000 Exp 3,900

33,000 57,000 33,900 54,900

24,000 21,000

Sales P57,000 + P54,900) P111,900

Cost of sales: Purchases 60,000

Less, Inv, end (900 +1,400) 2,300 57,700
Gross profit P 54,200
Operating expenses (P3,000 + P3,900) 6,900

Net income P47,300

 16. D
TRISHA BELLA
Cash Settlement

Share in NI (47,300/2) 23,650 23,650

Investment 30,000 30,000

Unsold Merchandise (900) (1,400)

52,750 52,250

Cash on Hand
57,000- 3,000 54,000
54,900- 3,900 51,000
Cash (Paid)/ Received (1,250) 1,250
17. C
Estimated cash available (56,800 + 10,000 + 8,960) P 75,760
Less: Prioritized claims:
Fully-secured liabilities 55,200
Partially-secured liabilities (Secured Portion) 10,000
Unsecured with Priority 2,400 67,600
Est amount available to unsecured liab w/o priority P 8,160
Less: Unsecured Amounts:
Partially-secured liabilities (Unsecured Portion) 6,000
Unsecured w/o priority: 14,400 20,400
Estimated deficiency to unsecured creditors w/o priority P (12,240)
Estimated recovery rate (ERR): 8,160/ 20,400 40%

PSC (BV) P16,000

Secured portion 10,000 * 100% P10,000
Unsecured Portion 6,000 * 40% 2,400
P12,400
Estimated gross loss (P1,356,000 + P180,000) P1,536,000

Less estimated net gain (P756,000 + P600,000) 1,356,000

Estimated net loss P 180,000
Less book value of stockholders’ equity
(P1,200,000 – P480,000) 720,000
Amount paid to stockholders P 540,000
Estimated pro-rata payment to stockholders
(P540,000/P720,000) : P0.75 to a Peso
19. A
Deferred Gross Profit (P820,312.50 – P358,125) x 25/125 P 92,437.50
 Inst sales (P180,000 + P693,020) P873,020
Less cost of installment sales 436,510
Deferred gross profit 436,510
Gross Profit Rate 50%

1,000,000: 20% DP 200,000 – 20,000= 180,000 Allow 120,000

True Value 100,000
80% Note 800,000/4= 200,000 Over Allow 20,000
200,000 * 3.4651= 693,020
20. D
Applied toBalance of
Date Payments Interest Principal Principal
01/01/17 873,020
01/01/17 P180,000 P180,000 693,020
06/30/17 200,000 P 41,581 158,419 534,601
12/31/17 200,000 32,076 167,924 366,677
Totals P580,000 P 73,657 P 506,343

RGP = 506,343 * 50% 253,171

 Total cost of sales
Inv, beg P105,000
Puchases 832,500
Reposession 4,500
Inv, end (142,500) P 799,500
Less Cost of regular sales (P577,500 x 70%) 404,250
Cost of installment sales, 2017 sales P 395,250

GPR on Inst Sales:

GPR, 2018 637,500- 395,250 / 637,500 38%

GPR, 2017 (P58,800 / P180,000 – P12,000) 35%

Total realized gross profit during 2017
On regular sales (P577,500 x 30%) P 173,250
On installment sales- 2017 (P180,000 –
P22,500 – P12,000) x 35% 50,925
On installment sales- 2018 (P637,500 –
300,000) x 38% 128,250
Total P352,425
CIP = P3,750,000 x 75% P 2,812,500
Less Progress Billings (PB) 1,500,000
Current assets (Due from customers) P 1,312,500
Construction in Progress (CIP) P 2,250,000
Less Progress Billings (PB) 1,500,000
Current assets (Due from customers) P 750,000
Actual loss-to-date, 12/31/18
(P8,400,000 – P8,670,000) P (270,000)
Est. loss-to-date, 12/31/17
(P8,400,000 – P8,460,000) ( 60,000)
Loss recognized in 2018 P (210,000)
The project was profitable thru the end of 2016, hence no
profit was recognized in 2015 and in 2016 under the zero-
profit-method. The estimated loss-to-date of P60,000 will
be the recognized loss for 2017.
 With Substantial Performance?

YES: Recognize Revenue NONE

Do not Recognize
Revenue

With Reasonable Assurance of Without Reasonable Exemption:

Collection Assurance of Collection DP 1. Non-refundable
2. Fairly represents the
ACCRUAL METHOD INSTALLMENT METHOD services provided
Recognize the entire Revenue RGP= Collection * GPR DP – earned
Note- uneraned

REVENUE
Int Bearing Note GPR:Revenue NIB Note
Int Bearing Note NIB Note Contract Price (Cost) DP + PV of Note
GP / Revenue
Contract Price CP- UI
DP + FA of Note DP + PV of Note DP + Inst Pymt Collection DP +(Inst Pymt –
Discount)
Int= FA of Note * IR
Disc= PV of Note * DR
FR-IFF (P420,000 + P1,098,000*) P1,518,000
FR – CFF (P360,000 x 3%) 10,800
Interest revenue (P1,098,000 x 24%) 263,520
Franchise Cost ( 333,960)
Expense ( 56,400)

Net income P1,401,960

*P457,500 x 2.40 = P1,098,000

 With Substantial Performance?

YES: Recognize Revenue NONE

Do not Recognize
Revenue

With Reasonable Assurance of Without Reasonable Exemption:

Collection Assurance of Collection DP 1. Non-refundable
2. Fairly represents the
ACCRUAL METHOD INSTALLMENT METHOD services provided
Recognize the entire Revenue RGP= Collection * GPR DP – earned
Note- uneraned

REVENUE
Int Bearing Note GPR:Revenue NIB Note
Int Bearing Note NIB Note Contract Price (Cost) DP + PV of Note
GP / Revenue
Contract Price CP- UI
DP + FA of Note DP + PV of Note DP + Inst Pymt Collection DP +(Inst Pymt –
Discount)
Int= FA of Note * IR
Disc= PV of Note * DR
Franchise revenue –IFF P2,250,000
Less Franchise cost 333,960
Gross profit P1,916,040
Gross profit rate 85.16%

RGP = (P420,000 + P457,500) x 85.16% P 747,279

 (300,000 + 240,000)/ 450,000= 120%

Sales (P1,000,000 + P500,000 + P400,000) P1,900,000

Less Cost of sales

MI, beg P150,000+[(P60,000+P48,000)/ 120%] P 240,000
Purchases 900,000
MI, end: 120,000 + [(P72,000 + P96,000)/120%] (260,000) 880,000
Gross profit P1,020,000
Less OPEX (P300,000 + P75,000 + P50,000) 425,000
Combined net income P 595,000
29. A
HO Books Branch Books
Branch A/C HO Account
UBs 200,000 191,350
Adjustments: (a) 15,750
(b) 2,000
(c) 900
(d) 1,500
(e) 2,000
(f)
(g) 13,500

ABs 213,500 213,500

Sales 1,500,000
Less: Cost of Sales 800,000
Gross Profit 700,000
Less: OPEX
Salaries 88,000
Rent Expense 35,000
Other Expenses 42,000
Supplies Expense (240,000 * .85) / 8 25,500
Dep Exp (150,000 * 30%) / 12 3,750 194,250
NET PROFIT P 505,750
Investment in High Tide shares P 125,440
Add: NCI (173,440 – 45,440) + 7,040
P135,040 * 25% 33,760
TOTAL 159,200
Less: FMV of NA 135,040
Goodwill P 24,160

Note: Goodwill not GROSSED-UP.

CNI = P78,400 + P44,000 – P12,000 + P4,000) P114,400
 GP COGS
Inv, beg RGP (80,000- 64,000) 16,000 * 1/2 8,000 (8,000)
Inv, end DGP (125,000- 100,000) 25,000* 40% (10,000) 10,000

SALES 600,000 + 300,000 - 125,000 = 775,000

COGS 480,000 + 250,000 -8,000 +10,000- 125,000 = 607,000

CNI 80,000+ 30,000 + 8,000- 10,000 = 108,000

Att. To Parent 80,000 +24,000 + 8,000- 10,000 = 102,000
(30,000 * 80%)
Att. To NCI 30,000 * 20% = 6,000
CNI 320,000+76,000+ 56,000 452,000

S1 S2
Direct Interest of Parent 80% 60%
Indirect Interest of UP 48% 80% * 60%
NCI 20% 52%
Att. To Parent 320,000 + (76,000 * 80%)+ (56,000 * 48%) = 407,680
Att. To NCI S1 76,000 * 20% = 15,200
S2 56,000 * 52% = 29,120
Date of transaction (2017) P 78,000
Date of settlement (2017) ( FC 97,500 x P0.78) 76,050
Forex loss P 1,950
FC * P 0.80 = P 78,000
FC = 97,500

Cash P 76,050
Forex loss 1,950
Accounts Receivable P 78,000
Contract Receivable (Php) P 149,600
Contract Payable (FC) P 149,600

(FC 220,000 x P0.68)

Forward rate (12/31/2016): P46.10
Spot rate (03/31/2017): P45.10
Difference P1.00 * $250,000 P 250,000
Loss on time value (P6,000 x 2/3) P 4,000
Loss on intrinsic value:
BSD (1.2 -1.12) * 400,000 32,000
DOS (1.2 -1.13) * 400,000 28,000 4,000
Total loss on put option P 8,000

OR FV on BSD 36,000
Less: FV on DOS 28,000
Loss in 2018 8,000
Agreed forward rate P0.42
Current forward rate .38
Decrease in forward rate P0.04 * P 1,000,000 = P 40,000
Multiply by PV of 0.9803 = P39,212
liability
This forward contract is a derivative financial instrument.
It does not have a fair value at Inception. The change at
December 31 was negative, and the value derived is a
liability. It is because this is a purchase forward contract
and the decrease in pesos over the FCR represents a loss.
 Changes in the fair values of a forward
contract after inception date
Current FR is MORE than
Contracted Forward Rate (FR)
(the Peso weakens)
Forward 1. Fair value is positive
Purchase 2. A gain is recorded
Contract 3. In the balance sheet the
FC is an asset
4. Cash is received upon expiry.
Forward 1. Fair value is negative
Sales 2. A loss is recorded
Contract 3. In the balance sheet the
FC is a liability
4. Cash is paid upon expiry.
Current FR is LESS than
Contracted Forward Rate (FR)
(the Peso strengthens)
1. Fair value is negative
2. A loss is recorded
3. In the balance sheet the
FC is a liability
4. Cash is paid upon expiry.
1. Fair value is positive
2. A gain is recorded
3. In the balance sheet the
FC is an asset
4. Cash is received upon expiry.
Original cost (P528,000 + P6400,000 + P960,000) P2,128,000
Plus additional cost (P80,000 + P128,000 + P192,000) 400,000
Total cost charged to Job 007 P2,528,000
Divide by units produced 200

Unit cost P 12,640

Actual factory overhead P 25,600
Applied factory overhead (P16,000 x 150%) 24,000

Under-applied factory overhead P 1,600

Cost of Goods Sold P 302,400
Finished goods, end 56,000
Finished goods, beginning ( 48,000)
Cost of goods manufactured P 310,400

45,000 * (30/100 emp) P 13,500

Completed & transferred 11,200 x P9 P 100,800
Cost of NLUs 560 x P9 5,040
Total cost of completed units P 105,840
Opening inventory: 4,000 x 5/8 2,500 units
Started in Process 5,000 x 100% 5,000
Closing inventory: 4,000 x ½ 2,000
4,000 x ¾ 3,000
Total EUP for each cost element 12,500 units
C&T 9,000 * 100% 9,000
IP, E 4,000 * ½ 2,000
4,000 * ¾ 3,000
EUP 14,000
 160,000/ 200,000 = 80%

Sales Value
Products @SOP Percent Joint Cost

W P 80,000 80 P 64,000
X 60,000 80 48,000
Y 40,000 80 32,000
Z 20,000 80 16,000
Totals P200,000 P160,000
Products Sales @ FB APC NRV Joint Cost

W P 90,000 7,500 P 82,500 P 60,000

X 70,000 6,000 64,000 46,545
Y 50,000 4,000 46,000 33,455
Z 30,000 2,500 27,500 20,000
P240,000 P20,000 P220,000 P160,000
Total Joint Production Cost P 262,000
Less:Revenue from By-Products 10,000
Net joint cost allocated to main products P 252,000
Allocated using the SV at Split off point SV @ SOP
X 300,000 * 0.56 168,000
Y 150,000 * 0.56 84,000
TOTAL SV 450,000 450,000

Rate= 252,000/ 450,000 = 0.56

 Actual price P 1.92 Actual quantity used 43,050
Less Standard price 2.00 Less Std Qty (525 x 80) 42,000
Difference P(0.08) Difference 1,050
x Qty purchased 46,000 x Standard price 2

Mats price variance P( 3,680) F Materials Qty variance 2,100 U

MPV= (AP – SP) * QP MQV= (AQ - SQ) * SP

Actual rate* 16.10 Actual hours 682.50
Less Standard rate 16.00 Standard hours 656.25
Difference .10 Difference 26.25
x Actual hours 682.50 x Standard rate 16

Labor rate variance 68.25 U Labor efficiency var 420 U

LRV= (AR – SR) * AH LEV= (AH – SH) * SR

*(P10,988.25/682.5 hrs) (525 x 1.25)

Actual factory overhead (P13,770 + P10,600) P 24,370
Less: Std hours x Std rate
(525/2) = 262.50 x 90 23,625

Factory overhead variance P 745 U

FOH Variance= AFOH- Applied (SH * SR)

 Budget Preparation and Presentation
◦ It covers estimation of government revenues, the determination of
budgetary priorities and activities; and the translation of approved
priorities and activities to expenditure levels for a budget year
◦ This begins with the issuance of the BUDGET CALL issued by the DBM. It
outlines the guidelines on the preparation of the agency budget
estimates to be submitted to the DBM. The DBM them consolidates all
budgets to form a government-wide budget to be submitted to the
President for final approval before forwarding to the Congress

 Budget Legislation and Authorization

◦ This refers to the enactment of the General Appropriations Bill based on
the budget of receipts and expenditures into Appropriations Act. Series
of Budget hearings is conducted. Appropriations are approved by the by
the legislative body in the form of General Appropriations Act which
covers most of the expenditures of the government. This act shall be
forwarded to the president of the Philippines
 Budget Execution or Operation
◦ This covers operational aspects of budgeting thus making
budgeting to serve as one of the principal tools of management
control to insure that public funds are spent only for the
specific purpose for which they are appropriated
◦ Involves the regulation of funds release, the scheduling of
preferred activities etc.

 Budget Accountability
◦ This aspect focuses tracking, monitoring and evaluation of
expenditures and performance. This is simply achieved by
comparing performance with predetermined plans.
 Appropriation
is the authorization made by a legislative body to allocate funds for
purposes specified by the legislative or similar authority.
 Allotment
is an authorization issued by the DBM to NGAs to incur obligations for
specified amounts contained in a legislative appropriation in the form of
budget release documents. It is also referred to as Obligational Authority.
 Notice of Cash Allocation (NCA)
authority issued by the DBM to central, regional and provincial offices and
operating units to cover the cash requirements of the agencies;
 Obligation
It refers to the commitment by a government agency arising from an act of
a duly authorized official which binds the government to the immediate or
eventual payments of a sum of money.
 Commission on Audit (COA) - shall have the exclusive authority to do
audit and examination, establish audit techniques, implement
accounting rules and regulations, that includes disallowances on the
use of government funds and properties.
 Department of Budget and Management (DBM) – is the department
responsible for the planning and implementation of the National
Budget for the sound utilization of government funds in achieving the
national government’s agenda on reform and growth. The DBM is
tasked to monitor all government allotments and appropriations
through maintenance of registries for better control and monitoring.
 Bureau of Treasury (BTs) - the department is the keeper of national
funds and disbursements. It is the lead agency in monitoring
transactions affecting the national government, agencies, and other
instrumentalities. It maintains the registry on the releases by the DBM,
as well as the bank transfers between agencies.
 Government Agencies – would include government instrumentalities
like bureaus, Congress, Judiciary, constitutional bodies and self
contained institutions, among others, which are required to have an
accounting division, which are of equal level with that of other
agencies that are tasked to do maintenance of accounts and submit
financial statements on a regular basis.
1. Accrual Accounting.
 A modified accrual basis of accounting shall be used. Under this method, all
expenses shall be recognized when incurred and reported in the financial
statements in the period to which they relate. Income shall be on accrual basis
except for transactions where accrual basis is impractical or when other methods
are required by law.

2. One Fund Concept.

 This system adopts the one fund concept. Separate fund accounting shall be done
only when specifically required by law or by a donor agency or when otherwise
necessitated by circumstances subject to prior approval of the Commission.

3. Chart of Accounts and Account Codes.

 A new chart of accounts and coding structure with a three-digit account
numbering system shall be adopted. (See Volume III, The Chart of Accounts)

4. Books of Accounts.
Regular Agency (RA) Books. These shall be used to record the receipt and
utilization of Notice of Cash Allocation (NCA) and other income/receipts
which the agencies are authorized to use and to deposit with Authorized
Government Depository Bank (AGDB) and the National Treasury. These
shall consist of journals and ledgers, as follows:
 Journals
◦ Cash Receipts Journal (CRJ)
◦ Cash Disbursements Journal (CDJ)
◦ Check Disbursements Journal (CkDJ)
◦ General Journal (GJ)
 Ledgers
◦ General Ledger (GL)
◦ Subsidiary Ledgers (SL)
National Government (NG) Books. These shall be used to record
income which the agencies are not authorized to use and are required
to be remitted to the National Treasury. These shall consist of:

◦ Cash Journal (CJ)

◦ General Journal (GJ)
◦ General Ledger (GL)
◦ Subsidiary Ledger (SL)
5. Financial Statements. The following statements shall be
prepared:

Balance Sheet

Statement of Government Equity

Statement of Income and Expenses

Statement of Cash Flows

Notes to Financial Statements

6. Two-Money Column Trial Balance. The two - money
column trial balance showing the account balances shall be
used.
7. Allotment and Obligation. Obligation accounting is modified to simplify
procedures in the incurrence and liquidation of obligations and the recording
of the budgetary accounts (allotments and obligations incurred and
liquidated). Separate registries shall be maintained to control the allotments
and obligations for each of the four classes of allotments, namely:

1. Registry of Allotments and Obligations - Capital Outlay (RAOCO)

2. Registry of Allotments and Obligations - Maintenance and Other
Operating Expenses (RAOMO)

3. Registry of Allotments and Obligations - Personal Services (RAOPS)

4. Registry of Allotments and Obligations- Financial Expenses (RAOFE).

8. Notice of Cash Allocation (NCA). The receipt of NCA by the agency shall
be recorded in the books as debit to account “Cash-National Treasury,
Modified Disbursement System (MDS)” and credit to account “Subsidy
Income from N
9. Financial Expenses. Financial expenses such as bank charges,
interest expenses, commitment charges and other related expenses
shall be separately classified from Maintenance and Other Operating
Expenses (MOOE).
10.Perpetual Inventory of Supplies and Materials. Supplies and
materials purchased for inventory purpose shall be recorded using
the perpetual inventory system. Regular purchases shall be coursed
thru the inventory account and issuances thereof shall be recorded as
they take place except those purchased out of Petty Cash Fund which
shall be charged directly to the appropriate expense accounts.
11.Valuation of Inventory. Cost of ending inventory of supplies and
materials shall be computed using the moving average method.

12.Maintenance of Supplies and Property, Plant and Equipment

Ledger Cards. For appropriate check and balance, the Accounting
Units of agencies, as well as the Property Offices, shall maintain
Supplies Ledger Cards/Stock Cards by stock number and Property,
Plant and Equipment Ledger Cards/Property Cards by category of
property, plant and equipment, respectively.
13.Construction of Assets. For assets under construction, the Construction Period Theory shall
be applied for costing purposes. Bonus paid to the contractor for completing the work ahead
of time shall be added to the total cost of the project. Liquidated damages charged and paid
for by the contractor shall be deducted from the total cost of the project. Any related
expenses incurred during the construction of the project, such as taxes, interest, license fees,
permit fees, clearance fee, etc. shall be capitalized, and those incurred after the construction
shall form part of operating cost.
Registry of Public Infrastructures/Registry of Reforestation Projects. For agencies that
construct public infrastructures, such as roads, bridges, waterways, railways, plaza, monuments,
etc., and invest on reforestation projects, a Registry of Public Infrastructures (RPI)/Registry of
Reforestation Projects (RRP) shall be maintained for each category of infrastructures/
reforestation projects. Examples are:

1. Registry of Public Infrastructures - Bridges (RPIB)

2. Registry of Public Infrastructures - Roads (RPIR)

3. Registry of Public Infrastructures - Parks (RPIP)

4. Registry of Reforestation Projects (RRP)

A Summary of Public Infrastructures/Reforestation Projects shall be prepared and included in
the Notes to Financial Statements.
15.Depreciation. The straight-line method of depreciation shall be used.
Depreciation shall start on the second month after purchase of the property,
plant and equipment, and a residual value equivalent to ten percent of the
purchase cost shall be set-up. Public infrastructures/reforestation projects as
well as serviceable assets that are no longer being used shall not be charged
any depreciation.

16.Reclassification of Assets. Serviceable assets no longer being used shall be

reclassified to “Other Assets” account and shall not be subject to depreciation.

17.Allowance for Doubtful Accounts. An Allowance for Doubtful Accounts

shall be set up for estimated uncollectible trade receivables to allow for their
fair valuation.

18.Elimination of Contingent Accounts. Contingent accounts shall no longer

be used. All financial transactions shall be recorded using the appropriate
accounts. Cash shortages and disallowed payments, which become final and
executory, shall be recorded under receivable accounts “Due From Officers
and Employees” or “Receivables-Disallowances/ Charges”, as the case may be.
19.Recognition of Liability. Liability shall be recognized at the time goods
and services are accepted or rendered and supplier/creditor bills are
received.

20.Interest Accrual. Whenever practical and appropriate, interest income

and/or expense shall be accrued and recognized in the books of accounts.

21.Accounting for Borrowings and Loans. All borrowings and loans

incurred shall be recorded to the appropriate liability accounts.

22.Elimination of corollary and negative journal entries. The use of

corollary and negative journal entries shall be stopped.
Acquisition/Disposition of assets shall be debited/credited to the
appropriate asset accounts. If an error is committed, a correcting entry to
adjust the original entry shall be prepared.
23.Petty Cash Fund. The Petty Cash Fund shall be maintained under the
imprest system. As such, all replenishments shall be directly charged to
the expense account and at all times, the Petty Cash Fund shall be equal
to the total cash on hand and the unreplenished expenses. The Petty Cash
Fund shall not be used to purchase regular inventory/items for stock.

24.Foreign Currency Adjustment. Cash deposits in foreign currency and

outstanding foreign loans shall be computed at the exchange rate
prescribed by the Bangko Sentral ng Pilipinas at balance sheet date. The
total cash deposits and foreign loans payable shall be adjusted at the end
of each month and any gain or loss on foreign exchange shall be
recognized. The subsidiary ledger for foreign currency obligations shall
reflect the appropriate foreign currency in which the loan is payable. The
liability shall be expressed both in the foreign and local currency.
In order to monitor allotments received, obligations incurred, NCAs received and
utilized, public infrastructures, dormant accounts, accounts written-off, loans and
grants, among others, registries shall be maintained by the concerned
government agencies.
 Registry of Appropriations and Allotments (RAPAL). The Registry of
Appropriations and Allotments (Appendix 12) shall be maintained by the
Department of Budget and Management (DBM) for each department of the
National Government to control approved appropriations and allotments
released.

 Registry of Allotments and NCA Issued (RANCAI). The Registry of Allotments

and NCA Issued (Appendix 13) shall be maintained by the DBM to control the
funding of allotments. The Registry shall be kept by department/agency.
Columns are provided for each allotment class and NCA released to the
department/agency. A column for the unfunded allotment is provided to
determine the balance of allotment without corresponding NCA.

 Registry of NCA and Replenishments (RENREP). The Registry of NCA and

Replenishments (Appendix 14) shall be used by the Bureau of the Treasury to
record the NCA releases and the bank replenishments made to cover MDS
checks issued by agencies.
Allotment and Obligation. Obligation accounting is modified to simplify
procedures in the incurrence and liquidation of obligations and the recording of
the budgetary accounts (allotments and obligations incurred and liquidated).
Separate registries shall be maintained to control the allotments and obligations
for each of the four classes of allotments, namely:

 Registry of Allotments and Obligations-Capital Outlay (RAOCO). The Registry of

Allotments and Obligations-Capital Outlay (Appendix 15) shall be used to
record allotments received and obligations incurred for capital outlay.

 Registry of Allotments and Obligations-Maintenance and Other Operating

Expenses (RAOMO). The Registry of Allotments and Obligations-Maintenance
and Other Operating Expenses (Appendix 16) shall be used to record
allotments received and obligations incurred for expenses classified under
Maintenance and Other Operating Expenses.
 Registry of Allotments and Obligations-Personal Services (RAOPS). The Registry of
Allotments and Obligations-Personal Services (Appendix 17) shall be used to record
allotments received and obligations incurred for expenses classified under Personal
Services.

 Registry of Allotments and Obligations-Financial Expenses (RAOFE). The Registry of

Allotments and Obligations-Financial Expenses (Appendix 18) shall be used to record
allotments received and obligations incurred for financial expenses, such as
commitment fees, bank charges, etc. so as to distinguish them from the regular
maintenance and other operating expenses.
1. Budgetary accounts of appropriations and allotments are entered in the registry
maintained by DBM. Allotments and obligations are also entered in appropriate registries
maintained by the agency. Under NGAS, budgetary accounts are no longer journalized.

2. The notice of cash allocation (NCA) received by the agency from DBM is journalized in
the regular agency books. (The other set of books of an agency is the National
Government books (NG).

3. The obligations incurred by the agency are not journalized, but posted to the
appropriate registry, as follows:
For capital outlay - RAOCO
Personal Services - RAOPS
Maintenance & Others - RAOMO
Financial expenses - RAOFE

4. Generally, withheld taxes by the agency are no longer remitted to BIR, but retained and
credited to Subsidy Income from NG under the Tax Remittance Advice (TRA) System.
The NCA released to the agency is reduced by the amount of estimated withholding
taxes pertinent to the allotment covered by the cash allocation.
5. Asset/perpetual inventory method will be followed in the recording of
expenditures if it applies to more than one period or when payment is for
materials for stock. The expense is taken up when the items are
consumed.

6. Cost of ending inventory of supplies and materials shall be computed

using the Moving Average method.

7. Costs of assets being constructed are debited to construction in progress

account (using construction period theory). This CIP account is closed to
the appropriate asset account upon completion.

8. Constructed Public Infrastructures are not shown among the fixed assets
on the balance sheet, rather they are deducted from government equity
(as part of closing entries) and transferred out to an appropriate registry.
They are not subject to depreciation charges.
9. Depreciation on fixed assets are taken up on the month following the month
of purchase or completion of construction. A 10% scrap value on the asset is
always assumed and the estimated life is prescribed by COA.

10.Income for which the agency is authorized to use for its operation is
recorded in the regular agency books. If the authority is with limitations,
such as any excess is to be remitted to the National Treasury the collections
shall first be recorded in the regular agency books, the expenses journalized,
and the excess is to be remitted to the National Treasury and recorded in the
agency’s NG books.

11.Two trial balance are prepared:

a) Pre-closing TB – which is also the adjusted TB. From this is prepared the
statement of income and expense.
b) Post-closing TB – from this is prepared the balance sheet.
12. Adjusting entries at end of period are the same as those recorded in
commercial accounting.

13. Closing entries are as follows:

1. Reversion of the unused or unutilized Subsidy Income from National
Government at the end of the year.

Subsidy Income from National Government X

Cash-National Treasury, MDS
X

2. Close the balance of the Subsidy Income from National Government to Income
& Expense Summary Account.

Subsidy Income from National Government X

Income & Expense Summary
X

3. Close the balance of all revenue accounts to Income & Expense Summary
Account.

Income from Government Services Operations X

Income from Government Business Operations X
Income & Expense Summary
Accounting for the incurred obligation requires only a
memo entry in the RAOMO; the formal entry is
recorded upon receipt of the billing.
1. Contributions are reported as revenue in the year received even though there are
donor-imposed use or time restrictions on the contributions. Donor-restricted
contributions are revenues in the year it is received, not in the year it is spent.

2. All expenses are reported as unrestricted on the Statement of Activities. This

means that expenses are deducted only from unrestricted revenues.

3. A reclassification to unrestricted net assets is necessary whenever net assets

temporarily restricted as to use and/or time is expended and/or has expired. A Private
nonprofit may show in its Statement of Activities temporarily restricted revenues as
unrestricted if received and spent in the same period.

4. A multi-year pledge should be reported at its present value. If there is a time

restriction on the pledge, the pledge should be reported as a temporarily restricted
revenue in the year the pledge is given.
5. Net assets under the control of the governing board are reported as unrestricted
net assets.

6. Contributed services which would be purchased if not donated, and which require
(1) performance by a specialist, and (2) enhancement of a non-financial asset, will
be recorded as an increase in both expenses and contributions.
7. GAAP require classification of nonprofit organization’s net assets and revenues,
expenses, gains and losses based on the existence or absence of donor-imposed
restrictions. They require that the amount of each of three classes of net assets be
displayed in a statement of financial position and that the amounts of change in
each such type of net assets be displayed in the statement of activities.
8. A liability (not revenue) is recorded when the reporting entity acts as an agent or
trustee. A recipient of assets who is an agent or trustee has little or no discretion in
determining how the assets transferred will be used. It means the recipient NPO will
not have variance power as to how the net assets received will be disposed, and is
therefore treated as an agency transaction.
9. An entity need not recognize the contributions of works of art and historical artifacts if
the collection is held for public exhibition rather than financial profit, cared for and
preserved, and, if sold, the proceeds are used to acquire other items for collection.

10. Quasi-endowment funds are established by the governing board using unrestricted
net assets. Therefore, the assets in the quasi-endowment would be included in the
unrestricted net assets category, even if the governing board would have imposed use or
time restrictions over it.
11. A transfer of assets with a conditional promise to contribute them shall be accounted
for as a refundable advance (a liability) until the conditions have been substantially met.
The conditions have been substantially met when the possibility that they will not be met
is remote.

12. Expiration of donor-imposed restrictions that simultaneously increase one type of net
assets and decrease another should be reported as reclassifications in the statement of
activities. Reclassifications are reported as “net assets released from restrictions.”
13. All investments in debt securities should be measured at fair value in the statement of
financial position.

14. Investments in equity securities that is neither classified as Investment in Associate or

as Investment in Subsidiary shall be reported at fair value in the statement of financial
position.

15. When a resource provider transfers assets to a nonprofit entity and (1) does not
grant the recipient organization variance power and (2) the recipient organization and the
beneficiaries are not financially interrelated, the recipient entity should record an increase
in assets and liabilities as a result of the donation

16. Contributions from a resource provider is reported as revenue if (1) the recipient entity
is granted variance power by the resource provider or (2) the recipient entity and the
beneficiary are financially interrelated organizations. Variance power means the ability of
the recipient organization to redirect the resources transferred to it by the resource
provider to other beneficiaries.
17. Gifts of long-lived assets, in the absence of donor-imposed restrictions, may adopt a
policy of either (1) treating the donation as restricted support over the remaining
estimated useful life of the asset, or (2) treating the donated asset as unrestricted support
by adopting an accounting policy which does not imply a time restriction on such gifts.
56. B
Not under authority (reclassified as
unrestricted when expended) P100,000
Under authority (initially recognized as
unrestricted) 675,000
Total unrestricted revenues for 2016 P775,000
 Amount charged to patients P800,000
Less contractual adjustments 110,000

Net patient revenues for 2017 P690,000

Courtesy allowances and contractual adjustments are not expenses. They
are revenue deductions that are subtracted from gross patient service
revenues to arrive at the net patient service revenue reported in the
statement of operations. In addition, bad debt expense is recorded and
allowance accounts are used to reduce net receivables for estimated bad
debts. Charity care services—those provided free of charge to patients who
qualify under a hospital’s charity care policy—are excluded from both gross
and net patient service revenues, because they are not expected to
generate cash flow.
Reverse acquisitions sometimes occur when a private operating entity wants to
become a public entity but does not want to register its equity shares. To
accomplish that, the private entity will arrange for a public entity to acquire its
equity interests in exchange for the equity interests of the public entity.
Ownership % acquired by accounting parent
(150 shares/250 shares) 60%
# of shares issued: [(60 shares/60%) x 40%] 40 shares
Cost of investment ( 40 shares x P40) P 1,600
Less FV of net assets of accounting
subsidiary (P500+P1,500-P700) P 1,300
Goodwill arising from the reverse
acquisition P 300
 Total consolidated assets (P3,700 + P500 +
P1,500 + P300) P 6,000

60. C
Capital stock (P600 + P1,600) P 2,200
Retained earnings 1,400 P 3,600