Chapter 11
1. Under the new government accounting system, the agency does not journalize the receipt of the allotment. It is recorded in the Registry of Allotments and Obligations by means of a memo entry.
2. Upon receipt of the NCA, the accountant of the agency shall journalize it by a debit to “Cash – National Treasury – MDS” and a credit to “Subsidy Income from National Government” which in effect identifies the share of the Agency in the income of the National Government.
3. The agency does not journalize the incurrence of obligation. The agency enters the obligation to purchase the office equipment in the Registry of Allotments and Obligations – Capital Outlay (RAOCO).
4. The accountant of the agency shall credit “Cash – National Treasury – MDS” each time a payment is made charged against the NCA and debit the specific account being paid for, either asset, liability or expense account. In this problem a liability account is debited “Accounts Payable”. The withholding tax of P5,000 is credited to “Due to BIR” account.
5. Since no Tax Remittance Advice (TRA) was issued by the agency. The remittance of the tax withheld to the BIR is credited to “Cash – National Treasury – MDS” account. The corresponding debit is to “Due to BIR” account.
In case TRA is issued by the agency the credit is to “Subsidy Income from National Government” account.
6. Petty cash fund is released to a Disbursing Officer who is in charge of the payment of petty expenses. This is recorded by a debit to “Cash – Disbursing Officer” account. The corresponding credit account is “Cash – National Treasury – MDS”.
7. Any unused PCF, P2,000 is to be returned. This is computed by deducting the total liquidated expenses, P8,000 (P5,000 + P3,000) from the total PCF of P10,000. The return is recorded by debiting “Cash – Collecting Officer” account and crediting “Petty Cash Fund” account.
8. The gross payroll, P150,000, is entered in the Registry of Allotments and Obligations – Personal Services (RAOPS).
10. The payment of employees’ salaries and other allowances is made by the Disbursing Officer from the payroll fund. This is recorded by debiting salaries and wages and other allowances and crediting all the deductions. The net payroll is credited to “Cash – Disbursing Officer” account. 11. Under the Construction Period Theory, all costs and expenses for the construction shall be
debited to “Construction in Progress” account (P50,000,000 x 50%). The corresponding credit are to “Advances to Contractor” account to close this account and “Accounts Payable” account.
12. See explanation No. 4.
13. When the project is completed, the “Construction in Progress” account is closed from the books and the fixed asset account “Buildings” is debited for the total contract price of P50,000,000.
14. This transaction in Inter – Agency transfer of funds to implement an Agency Project. When cash is transferred to an implementing agency (IA), the source agency (SA) debits “Due from NGA” account and credit “Cash – National Treasury – MDS”. As soon as the project is completed by the IA, the “Due from NGA” account is closed, and the asset account “Land Development” is debited. 15. Since the BIR has no authority to use the income collected. Such income shall be recorded by the BIR in separate books of accounts, the National Government (NG) books. The collection shall be credited to the income account, Income Taxes – Individual. This entry is reversed upon
remittance to the National Treasury.
16. Refer to explanation No. 15 above.
17. For agencies which are authorized to use income collected for their operations, the collections shall be recorded as income in the Regular Books (RA) books. The deposit is recorded by a debit to “Cash in Bank – Local Currency – Current Account (LCCA)” account and a credit to “Cash – Collecting Officer” account.
18. The payment of repairs should be debited to an expense account “Repairs and Maintenance – Office Building”. The corresponding credit is to “Cash in Bank – LCCA” account.
19. The unused NCA as the end of the year should be reverted to the Bureau of Treasury because policy of the DBM that the NCA will be good for the year it was issued. The computation is:
Total NCA received for the year P 10,000,000
Total MDS checks issued 9,000,000
Unused NCA P1,000,000
NCA received [(P50,000,000 x 90%) x 80%] P36,000,000 Payment of obligation [(P36,000,000 x 90%) x 75%] 24,300,000
Unused NCA P11,700,000
21. The net income over expense to be closed to Retained Operating Surplus is computed as follows (In Thousands):
Subsidy Income from National Government P26,000
Less: Salaries and wages – regular pay P5,500
Life and Retirement Insurance Contribution 400
Pag – ibig contribution 200
22. To compute the net income over expenses, a Statement of Income and Expenses is to be prepared as follows (In Millions):
Subsidy Income from NG P150
Less: Reversion of unused subsidy P30
Refund of excess cash advance 5 35
Net Subsidy Income from NG 115
Less: Expenses:
Salaries and wages – Regular pay P55
ADCOM 2
Net income over expense P 15
23. Government Equity is the excess of the total assets over the total liabilities. The computation therefore is (In Millions):
Fixed assets 780
Total assets P1,050
Less: Current Liabilities 205
Government Equity P 845
24. The Net Cash Provided by Operating Activities is computed as follows (In Millions):
Net income over expenses P500
Add:
Depreciation P 5
Increase in accounts payable 30
Increase in withholding tax payable 6 41
Total P541
Deduct:
Increase in Due from NGA P58
Increase in supplies inventory 23 81
Net Cash Provided by Operating Activities P460
25. Under the New Government Accounting System, corrections of erroneous journal entries shall not be effected by negative entries (amounts in parenthesis) but by making necessary reversing or other adjusting entries, all in positive amounts. Therefore, entry (B) is correct.
26. Selling Price (Dr. Cash) P400,000
Less: Book Value
Cost (Cr – Office Equipment) P600,000
Accumulated Depreciation (Dr.) 300,000 300,000
Gain on Sale (CR) P100,000
27. B 28. C
29. The entry to recess the remittance of income tax collected to the BTR is: Income taxes – Individual
Cash – Collecting Officer Therefore, choice C is correct.
