2. Volume I Accounting Policies, Guidelines and
Procedures and Illustrative Accounting Entries
3. Chapter 1 INTRODUCTION
• Sec. 1. Legal Basis. The Government Accounting Manual (GAM) is
prescribed by COA pursuant to Article IX-D, Section 2 par. (2) of the
1987 Constitution of the Republic of the Philippines which provides
that: “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".
(Underscoring supplied)
4. • Sec. 2. Coverage. This Manual presents the basic accounting policies and
principles in accordance with the Philippine Public Sector Accounting
Standards (PPSAS) adopted thru COA Resolution No. 2014-003 dated
January 24, 2014 and other pertinent laws, rules and regulations. It
includes the Revised Chart of Accounts (RCA) prescribed under COA
Circular No. 2013-002 dated January 30, 2013, as amended; the accounting
procedures, books, registries, records, forms, reports, and financial
statements; and illustrative accounting entries. It shall be used by all
National Government Agencies (NGAs) in the: a. preparation of the general
purpose financial statements in accordance with the PPSAS and other
financial reports as may be required by laws, rules and regulations; and b.
reporting of budget, revenue and expenditure in accordance with laws,
rules and regulations.
5. • Sec. 3. Objective of the Manual. The Manual aims to update the
following: a. standards, policies, guidelines and procedures in
accounting for government funds and property; b. coding structure
and accounts; and c. accounting books, registries, records, forms,
reports and financial statements
7. • Sec. 1. Scope. This chapter covers the general provisions from existing
laws, rules and regulations; and the basic standards/fundamental
accounting principles for financial reporting by national government
agencies.
8. • Sec. 2. Definition of Terms. For the purpose of this Manual, the terms used as stated
below shall be construed to mean as follows: a. Accrual basis – means a basis of
accounting under which transactions and other events are recognized when they occur
(and not only when cash or its equivalent is received or paid). Therefore, the transactions
and events are recognized in the accounting records and recognized in the financial
statements of the periods to which they relate. The elements recognized under accrual
accounting are assets, liabilities, net assets/equity, revenue, and expenses. b. Assets –
are resources controlled by an entity as a result of past events, and from which future
economic benefits or service potential are expected to flow to the entity. c.
Contributions from owners – means future economic benefits or service potential that
have been contributed to the entity by parties external to the entity, other than those
that result in liabilities of the entity, that establish a financial interest in the net
assets/equity of the entity, which: 1. conveys entitlement both to (i) distributions of
future economic benefits or service potential by the entity during its life, such
distributions being at the discretion of the owners or their representatives; and to (ii)
distributions of any excess of assets over liabilities in the event of the entity being wound
up; and/or 2. can be sold, exchanged, transferred, or redeemed.
9. • d. Distributions to owners – means future economic benefits or service potential
distributed by the entity to all or some of its owners, either as a return on investment or
as a return of investment. e. Entity – refers to a government agency, department or
operating/field unit. It may be referred to in this GAM as an agency. f. Expenses – are
decreases in economic benefits or service potential during the reporting period in the
form of outflows or consumption of assets or incurrence of liabilities that result in
decreases in net assets/equity, other than those relating to distributions to owners. g.
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 results thereof. (Sec.
109, Presidential Decree (P.D.) No. 1445) h. Government Budget – is the financial plan of
a government for a given period, usually for a fiscal year, which shows what its resources
are, and how they will be generated 3 and used over the fiscal period. The budget is the
government's key instrument for promoting its socio-economic objectives. The
government budget also refers to the income, expenditures and sources of borrowings of
the National Government (NG) that are used to achieve national objectives, strategies
and programs. i. Liabilities – are firm obligations of the entity arising from past events,
the settlement of which is expected to result in an outflow from the entity of resources
embodying economic benefits or service potential. j. Net assets/equity – is the residual
interest in the assets of the entity after deducting all its liabilities. k. Revenue – is the
gross inflow of economic benefits or service potential during the reporting period when
those inflows result in an increase in net assets/equity, other than increases relating to
contributions from owners. l. Revenue funds – comprise all funds derived from the
income of any agency of the government and available for appropriation or expenditure
in accordance with law. (Section 3, P.D. No. 1445)
