Chapter 2


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.

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.

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 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 of P.D. No. 1445)

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