2. Module VII
Learning Objectives:
At the end of the module, the students should be able to:
1.identify the different accounting books and
their uses,
2.recognize the relevance of double-entry
procedures.
3. Module VII
Chart of Accounts
•provides the framework within which the accounting
records are constructed.
•It is a list of general ledger accounts consisting of real
and nominal accounts.
•It contains the account's name, a brief description of
the account, and an account number assigned to aid
in recording and tracking transactions to achieve
uniformity in the recording of government financial
transactions.
4. Module VII
CLASSIFICATION OF ALL FINANCIAL
STATEMENT
Account
Types of Accounts are:
•Asset accounts
•Liability accounts
•Equity accounts
•Revenue or income accounts
•Expense accounts
•Contra-accounts
5. Module VII
Assets
These are properties used in the operation or investment
activities of an entity. Cash, accounts receivable, notes
receivable, inventory, marketable securities, land, and equipment
are some examples.
Liabilities.
These are claims by creditors to the property (assets) of
an entity until they are paid. Also, these are amounts the business
owes to others.
Equity.
Assets minus liabilities.
6. Module VII
Revenue /Income.
The gross increase in equity resulting from the operations
and other activities of the entity.
General Income Accounts. Encompasses all types of
revenue/income generated by government agencies in the exercise of their
administrative and regulatory function, income from public enterprises/investments,
and income from grants and donations including subsidies.
Specific Income Accounts. Encompasses all taxes imposed on
taxable income, properties, and use or sale of goods and services, taxes on
international trade and transactions and other taxes including fines and penalties.
Also included under these accounts are income generated from local government,
schools and hospital operations.
7. Module VII
Expenses.
Decrease in equity (capital) resulting from assets, and
services and supplies consumed in the operations of an entity. The
cost of doing business.
Personal Services.
These accounts include basic pay, all authorized allowances, bonus, cash
gifts, incentives and other personnel benefits of officials and employees of the
government.
Maintenance and Other Operating Expenses.
These accounts include expenses necessary for the regular operations of
an agency
Financial Expenses.
These accounts include bank charges, interest expense, commitment charges,
documentary stamp expense and other financial charges. It also includes losses incurred
relative to foreign exchange transactions and debt service subsidy to GOCCs.
11. Module VII
T-account
is used as a visual aid for seeing the effect of the debit
and credit on the two (or more) accounts.
The words debit and credit were derived from the Latin
debitum ("what is due") and creditum ("something entrusted
to another or a loan").
abbreviation DR for debit and CR for credit
12. Module VII
Real Accounts.
These are the balance sheet accounts for assets,
liabilities and equity accounts.
Nominal Accounts.
These are the income and expense accounts.
Normal Balance.
The debit or credit balance that an account is
expected to have.
17. Module VII
Double-Entry System
The double-entry system requires every transaction to
be recorded in at least two places (accounts) using a
debit and a credit with the total debits of the
transaction equal to the total credits. Each transaction
is recorded in a "formal" journal as a debit entry in
one account and as a credit entry in another account.
The double-entry system also has built-in checks and balances. Due to the use of
debits and credits, the double-entry system is self-balancing.
19. Module VII
Single Entry System
•is an "informal" accounting/bookkeeping system where only
one entry is made to record
•It generally includes a daily summary of cash receipts and a
monthly record of receipts and disbursements.
•It is not a complete accounting system but it shows income and
expenses in sufficient detail.
•This system focuses on the business' profit and loss statement
and not on its balance sheet. Thus, it does not provide an entity
with all the financial information needed to adequately report
its financial affairs.
21. Module VII
Advantages and Disadvantages of
the single-entry system
Advantage
Single-entry bookkeeping is the ideal system for simple
operations and low activity because of its simplicity. It does not
require a formally trained person to use the system. Because
single-entry is limited
22. Module VII
Advantages and Disadvantages of
the single-entry system
Disadvantage
a. It does not track asset and liability accounts such as
inventory, accounts receivable and accounts payable.
b. Facilitates the calculation of income but not the
financial position. There is no direct linkage between the income
and the balance sheet.
c. Errors may be difficult to detect. It does not provide a
method to check clerical errors like a trial balance.
23. Module VII
Book of Accounts
The government accounting system is on a double-
entry basis with a general ledger in which all financial
transactions are recorded. Subsidiary records are kept
where necessary.
Common terminology and classification are
used consistently throughout the budget,
the accounts, and the financial reports.
24. Module VII
Book of Accounts
The books of accounts to be maintained under the
New Government Accounting System (NGAS) are:
25. Module VII
•preliminary records where transactions are
first entered into the accounting system
•commonly referred to as the book of original
entry
•The information written in a journal is done
chronologically.
Journals
The journals required to be maintained under NGAS are : Cash Receipts Journal
(CRJ), Cash Disbursements Journal (CDJ), Check Disbursements Journal (CkDJ), and
General Journal (GJ).
30. Module VII
•book of final entry where the accounts are arranged in the same
sequence as in the chart of accounts.
•No entry is made in the general ledger unless the said entry
originates from the journal.
•A controlling account is a summary account in the general
ledger. The details that support the balance in the summary
account are contained in a subsidiary ledger.
•Subsidiary Ledger is a group of accounts showing in detail the
same information shown in summary by the controlling (general
ledger) account.
The General Ledger