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Trial Balance and Adjusting and Closing Entries Trial Balance.

The trial balance (TB) is a list of all the accounts with balances in the GL. The accounts shall be listed following the sequence in the charts of accounts. The TB is prepared to check the quality of the debit and credit balances of all GL accounts as of a given period and to serve as basis for the preparation of Financial Statements (FSs). Purposes of the Trial Balancce. The TB is prepared for the following purposes: 1. Prove the mathematical equality of the debit and credit coolumns; 2. Serve as a basis for the preparation of FSs. Types of Trial Balance. Two types of TB shall be prepared at yearend, the Pre-Closing and Post-Closing TBs. The Pre-Closing TB shall be prepared after all the adjusting entries have been recorded in the GJ and the accounts posted to the GL and respective SL. The Post-Closing TB shall be prepared at yearend after all the closing journal entries have been recorded in the GJ and the accounts posted to the GL. Submission of Trial Balance. TB shall be prepared in four copies and shall be submitted within thirty (30) days after the close of each month. The yearend Pre-Closing and Post-Closing TBs shall be submitted on or before February 14 of each year to be distributed as follows: Original COA Auditor who has supervision over the City/Municipality where the barangay is located 2 copy Sangguniang Barangay
nd

3rd copy PB/BRK 4th copy - City/Municipal Accountant Adjusting Journal Entries. Prior to the preparation of the Pre-Closing TB, adjusting journal entries shall be prepared to recognize all revenues and expenses earned and incurred during the period but not yet recorded. Depreciation expenses for PPE shall be taken up monthly. Depreciation is the systematic and gradual allocation of cost.

Adjusting Journal Entries Pro-forma Accounting Entries 1. Accrued Items a. Asset/Revenue Adjustments Rent Receivables Rent Income 133 642 xx xx

To record receivable for the rental of barangay equipment. b. Liability/Expense adjustments Honoraria Due to Officers and Employees 720 403 xx xx

To record unpaid honoraria of the Punong Barangay. 2. Prepaid Items a. Asset/Expense adjustments Rent Expenses Prepaid Rent 782 177 xx xx

To record the expired portion of the advance rental paid to the ABC company. b. Liability/Revenue Adjustments Other Deferred Credits Rent Income 455 642 xx xx

To adjust the rental collected in advance from the lessee. 3. Depreciation Depreciation Office Equipment Accumulated Deprn. Office Equipment 921 321 xx xx

To record depreciation expense of office equipment for the month. 4. Transfer of Public Infrastractures and Reforestration Projects to the registries Government Equity Roads, Highways and Bridges Other Public Infrastractures 501 251 260 xx xx xx

To transfer completed public infrastructures to the specific registries.

Closing Journal Entries. These journal entries shall be prepared to close the balances of all nominal/intermediate accounts at the end of the accounting period prior to the preparation of the PostClosing TB and generation of the FSs. Closing Journal Entries Pro-forma Accounting Entries 1. Closing of Income Accounts Account Title Account Code Internal Revenue Allotment Real Property Tax Tax on Sand, Gravel and Other Quary Products Permit Fees Fines and Penalties Permits and Licences Clearance and Certification Fees Garbage Fees Other Service Income Rent Income Income from Grants and Donations Income and Expense Summary 665 588 593 605 609 613 616 628 642 662 512 xx xx xx xx xx xx xx xx xx xx xx Dr. Cr.

To close the income accounts to the Income and Expense Summary account. 2. Closing of the Expense accounts Income and Expense Summary Salaries and Wages - Regular Honoraria Travelling Expense Office Supplies Expenses Gasoline, Oil and Lubricants Telephone Expenses - Landline Repairs and Maintenance Office Equipment Depreciation Office Building Depreciation Motor Vehicles 512 701 720 751 755 761 772 821 911 941 xx xx xx xx xx xx xx xx xx xx

To close the expense accounts to the Income and Expense Summary account.

3. Closing of the balance of the Income and Expense Summary account a. Income exceeds the expenses Income and Expense Summary Retained Operating Surplus 512 513 xx xx

To close Income and Expense Summary account to Retained Operating Surplus account. b. Expenses exceeds the income Retained Operating Surplus Income and Expense Summary 513 512 xx xx

To close Income and Expense Summary account to Retained Operating Surplus account. 4. Closing of Prior Years Adjustment account a. Account with credit balance Prior Years Adjustment Retained Operating Surplus 684 513 xx xx

To close the credit balance of Prior Years Adjustments account to Retained Operating Surplus account. b. Account with debit balance Retained Operating Surplus Prior Years Adjustment 513 684 xx xx

To close the debit balance of Prior Years Adjustments account to Retained Operating Surplus account. 5. Closing of Retained Operating Surplus account a. Account with credit balance Retained Operating Surplus Government Equity 513 501 xx xx

To close the credit balance of Retained Operating Surplus account to Government Equity. c. Account with debit balance Government Equity Retained Operating Surplus 501 513 xx xx

To close the debit balance of Retained Operating Surplus account to Government Equity.

Working Trial Balance. It is a tool for sorting and accumulating information needed for the preparation of the financial statements. It is a columnar sheet used to adjust and close the account balances. The suggested format is as follows: Unadjusted Trial Adjustments Balance Dr. B Cr. Dr. C Cr. PreClosing Trial Balance Dr. Cr. D Statement of Income and Expenses Dr. Cr. E Closing Entries Dr. F Cr. PostClosing Trial Balance Dr. Cr. G Balance Sheet Dr. H Cr.

Accounts Title Code A

a. The account title and code columns. The accounts shall be presented following the sequence in the Chart of Accounts. b. The Unadjusted TB columns shall show the debit and credit balance of the GL accounts. c. Adjustment columns shall show the adjusting/correcting entries effected to the accounts. d. Pre-Closing TB columns shall show the balances of all the accounts after the adjustments are effected. e. Statement of Income and Expenses columns shall show the debit and credit balances of all the nominal accounts. f. Closing entries columns shall show the amounts debited and credited to close the nominal accounts. g. Post-Closing TB columns shall show the debit and credit balances of the accounts after posting the closing entries. h. Balance Sheet columns shall show the debit and credit balances of all the real accounts in the Post-Closing TB.

Preparation of Pre-Closing Trial Balance Narrative Procedures Area of Responsibility/ Person Responsible Barangay Bookkeeper Seq A 1 2 Unadjusted TB Totals, rules and extracts the balances of the GL accounts. Lists all GL accounts with debit and credit balances. Totals the debits and credits of the unadjusted Tb and check the equality of the debit and credit totals. Note 1. In case the TB does not balance, the following shall be done: B 3 Check individual footings and balances for any error Check the balances per GL Check the footings and extraction of balance in the GL Activity

Pre-Closing TB Prepares JEV for the yearend adjusting/correcting journal entries. Signs the Prepared by portion of the JEV.

Forwards the JEV to the City/Municipal Accountant for review and approval.

City/Municipal Accountant

5 6

Review and approves the JEV. Returns JEV to the Barangay Bookkeeper for recording in the books.

Barangay Bookkeeper

Receives the approved JEV and records adjusting/correcting entries in the GJ. Files JEV.

Posts the entries in the GJ to the GL and SL. Foots and extracts the balances of the GL and SL.

Based on the GL balances, prepares the Pre-Closing TB. Initials below the name of the City/Municipal Accountant. Note 2. The Pre-Closing TB shall be prepared in four copies to be distributed as follows: Original COA Auditor 2nd Copy - Sangguniang Barangay 3rd Copy PB/BRK 4th Copy - City/Municipal Accountant

Area of Responsibility/ Person Responsible

Seq 10

Activity Forwards the Pre-Closing TB to the City/Municipal Accountant for review and certification.

City/Municipal Accountant

11 12

Reviews and certifies the Pre-Closing TB. Returns the Pre-Closing TB to the Barangay Bookkeeper for release.

Barangay Bookkeeper

13 14

Receives the certified Pre-Closing TB. Releases the Pre-Closing TB to the concerned offices thru the releasing officer of the City/Municipality and retains the 3rd copy for file.

PREPARATION OF PRE-CLOSING TRIAL BALANCE Procedural Flow Chart Barangay Bookkeeper City/Municipal Accountant A. Unadjusted Trial Balance
totals, rules and extracts

1 2 lists and totals Note 1

GL

Unadjusted TB
5

B. Pre-Closing Trial Balance

prepares

reviews and approves

forwards

Adj/Cor JEV

Adj/Cor JEV

returns
receives and records

Adj/Cor JEV

GL
8
posts, foots, and extracts

GL
Prepares Note 2 Symbols:

SL

11

9 10 forwards

reviews and certifies

- - Flow of Documents - Records/Prepares/Foots/Extrac - Books - Document

PreCTB 1-4
13

PreCTB 1-4
returns receives 12

- File
- Process

PreCTB 3 PreCTB 1-2,4


14 releases

Notes: 1. In case the TB does not balance, the following shall be done: - Checks individual footings and balances for any error - Checks the balances per GL - Checks the footings and extraction of balance in the GL 2. The PreCTB shall be prepared in four copies to be distributed as follows: Original COA Auditor 2nd Copy Sangguniang Barangay 3rd Copy PB/BRK 4th Copy City/Municipal Accountant

Legend: GJ General Journal GL General Ledger SL Subsidiary Ledger TB Trial Balance Adj/Cor Adjusting/Correcting Entries JEV Journal Entry Voucher PreCTB Preclosing Trial Balance

Preparation of Post-Closing Trial Balance Narrative Procedures Area of Responsibility/ Person Responsible Barangay Bookkeeper Seq 1 2 Activity Retrieves the Pre-Closing TB. Prepares the JEV for the closing journal entries and signs the Prepared by portion of the JEV. 3 City/Municipal Accountant 4 5 Forwards the JEV to the City/Municipal Accountant Reviews and approves the JEV. Returns the approved JEV to the Barangay Bookkeeper for recording in the books. Barangay Bookkeeper 6 7 Records the approved JEV in the GJ and files. Post entries from the GJ to the GL and SL. Foots and extracts the balances of the GL and SL. 8 Based on the GL balances, prepares the Post-Closing TB. Initials below the name of the City/Municipal Accountant. 9 City/Municipal Accountant 10 11 Forwards the Post-Closing TB to the City/Municipal Accountant. Reviews and certifies the Post-Closing TB. Returns the certified Post-Closing TB to the Barangay Bookkeeper.

PREPARATION OF POST-CLOSING TRIAL BALANCE Procedural Flow Chart Barangay Bookkeeper City/Municipal Accountant
4

retrieves

prepares
2

forwards

reviews and approves

PreCTB

JEV

JEV

JEV

returns

records

GJ
prepares
8 7

posts, foots and extracts reviews and certifies

PCTB
9

GJ SL
forwards

10

PCTB
11

PCTB

returns

Legend: GJ General Journal GL General Ledger SL Subsidiary Ledger PCTB Post-Closing Trial Balance PreCTB Pre-Closing Trial Balance JEV Journal Entry Voucher

Symbols:

-Flow of Documents -Records/Prepares/Foots/Extracts


-Books -Document -File -Process

Financial Statements Financial Statements and Supporting Schedules. The following barangay FSs and supporting schedules shall be prepared annually: 1. Balance Sheet (BS) is a formal statement showing the financial condition of the barangay as of a particular date. It shows information on the three elements of financial position, namely: assets, liabilities and government equity. It shall be prepared based on information taken from the yearend Post-Closing TB. 2. Statement of Income and Expenses (SIE) is a statement showing the results of operations of the barangay for a particular period ended. This statement shall be prepared based on the information taken from Pre-Closing TB. 3. Statement of Cash Flows (SCF) is a statement summarizing all cash transactions of the barangay. It shall be prepared using the Direct Method. It shows the amount of cash received and disbursed for the operating, investing and financing activities and the net cash provided by/(used in) each activity as of a given date. The ending balance of SCF should tally with the cash balance per BS. 4. Statement of Changes in Government Equity (SCGE) is a statement showing the result or changes in Government Equity account as of a given period. 5. Supporting schedules shall be prepared as follows: a. Schedule of Public Infrastructures b. Schedule of Reforestation Projects c. Schedule of Accounts Receivables d. Schedule of Accounts Payable e. Other schedule that may be required 6. Noyes to Financial Statements shall be made an integral part of the FSs. The disclosures pertain to additional information to enhance the value of financial data in the FSs. These may explain information that cannot be expressed in money terms and description of present accounting policies. The FSs shall be prepared in four copies to be distributed as follows: Original COA Auditor who has supervision over the City/Municipality where the barangay is located 2 Copy Sangguniang Barangay
nd

3rd Copy PB/BRK 4th Copy - City/Municipal Accountant 7. The FSs shall be supported with the statement of Management Responsibility for Financial Statements.

Preparation of Post-Closing Trial Balance Narrative Procedures Area of Responsibility/ Person Responsible Barangay Bookkeeper Seq A 1 2 Activity Statement of Income and Expenses Retrieves the Pre-Closing TB from file. Prepares the SIE of a specific barangay in detailed and condensed format. B 3 4 C 5 6 Balance Sheet Retrieves the Post-Closing TB from file. Prepares the BS in detailed and condensed format. Statement of Changes in Government Equity Retrieves the GL from file. Prepares the SCGE based on the postings made on the GL of the Government Equity account. 7 D 8 Reconciles the ending balance of the SCGE with the BS. Statement of Cash Flows Retrieves the CRDReg, CDReg, CHBReg, CkDReg, and the previous years SCF from file. 9 Prepares the SCF. Note 1. The ending balance of Cash in the previous years SCF shall be forwarded as beginning balance of Cash in current years SCF. 10 Reconciles the ending balance of the SCF with the total of the cash accounts in the BS. E Statement of Management Responsibility for the Financial Statements 11 12 Compiles all the FSs prepared. Prepares the Statement of Management Responsibility for the Financial Statements (SMRFS). Initials below the name of the City/Municipal Accountant. 13 Submits the SMRFS with the prepared BS, SIE, SCF and SGE to the City/Municipal Accountant for signature on the SMRFS.

Area of Responsibility/ Person Responsible

Seq

Activity Note 2. The detailed and condensed FSs and the SMRFS shall be prepared in four (4) copies to be distributed as follows: Original COA Auditor 2nd Copy Sangguniang Barangay 3rd Copy PB/BRK 4th Copy - City/Municipal Accountant

City/Municipal Accountant

14 15

Reviews and signs the SMRFS. Forwards the SMRFS to the Punong Barangay for

countersignature. Punong Barangay 16 Signs the SMRFS and returns to the City/Municipal Accountant for release. 17 Forwards the signed SMRFS with the FS to the Barangay Bookkeeper for recording in the logbook and release to concerned offices. Barangay Bookkeeper 18 Receives and releases the FS, complete with all the supporting schedules, to the concerned offices and retains a copy for file.

PREPARATION OF FINANCIAL STATEMENTS Procedural Flow Chart

Barangay Bookkeeper
retrieves

City/Municipal Accountant

Punong Baranngay

1 2
prepares

PreCTB

SIE C/D 1-4

retrieves

3 4
prepares

PCTB

BS C/D 1-4

retrieves

5 6 GL

reconciles 7 prepares

16
signs

SCGE 1-4
reconciles Prepares Note 1

retrieves

8 9

10

CRDReg CRDReg CRDReg CRDReg

SCF 1-4

BS - C/D 1-4 SIE - C/D 1-4 SCGE 1-4 SCF 1-4 1-4

reviews and signs

SMRFS

14

BS - C/D 1-4 SIE - C/D 1-4 SCGE 1-4 SCF 1-4 1-4

SMRFS

SCF
submits compiles

15

forwards

11 12

prepares

13 SMRFS

BS - C/D 1-4 SIE - C/D 1-4 SCGE 1-4 SCF 1-4

1-4
receives and releases Note 2

BS - C/D 1-4 SIE - C/D 1-4 SCGE 1-4 SCF 1-4 1-4

18

17 SMRFS

forwards

Legend: BS-C/D - Balance Sheet-Condensed/Detailed SIE-C/D - Statement of Income and Expenses Condensed/Detailed SCGE - Statement of Changes in Government Equity SCF - Statement of Cash Flows CRDReg - Cash Receipts and Deposits Register CDReg - Cash Disbursement Register CHBReg - Cash on Hand and in Bank Register CkDReg - Check Disbursement Register SMRFS - Statement of Management Responsibility for the Financial Statements PreCTB - Pre-Closing Trial Balance PCTB - Post-Closing Trial Balance

Symbols:

Notes:

- Flow of Documents - Records/Prepares/Foots/Extracts - Books - Document - Process

1. The ending balance of cash in previous years SCF shall be forwarded as beginning balance of Cash in current years SCF. 2. The detailed and condensed FSs and the SMFRS shall be prepared in 4 copies to be distributed as follows: Original COA Auditor 2nd copy Sangguniang Barangay 3rd copy PB/BRK 4th copy City/Municipal Accountant

Consolidation of Trial Balance and Financial Statements Consolidation of Trial Balance. The City/Municipal Accountant shall prepare the Consolidated Pre-Closing and Post-Closing TBs of all barangays under the city/municipality at yearend. Consolidation of Financial Statements. The City/Municipal Accountant shall consolidate the following FSs and schedules of all barangays under the city/municipality at yearend: a. Detailed and Condensed Balance Sheet b. Detailed and Condensed Statement of Income and Expenses c. Statement of Cash Flows (Direct Method) d. Statement of Changes in Government Equity e. Schedule of Infrastructure Projects and Reforestation Projects (if applicable) f. Schedule of Accounts Receivable

g. Schedule of Accounts Payable Submission of Consolidated TBs and FSs. The City/Municipal Accountant shall submit the Consolidated TBs and FSs for Barangays together with those of the City/Municipality to the GAFMIS Sector, Commission on Audit, Central Office, and COA Auditor/ATL in printed and digital copies within 60 days after the 31st of December.

Consolidation of Pre-Closing and Post-Closing Trial Balances Narrative Procedures Area of Responsibility/ Person Responsible Barangay Bookkeeper Seq 1 Activity Prepares the Consolidated Pre-Closing and Post-Closing TBs of all the barangays of the City/Municipality based on the individual Pre-Closing and Post-Closing TB of each barangay. Note 1. The Consolidated Pre-Closing and Post-Closing TB shall be prepared in three copies to be distributed as follows: Original GAFMIS, COA, CO 2nd Copy COA Auditor/ATL 3rd Copy City/Municipal Accountant 2 Submits the Consolidated Pre-Closing and Post-Closing TBs to the City/Municipality Accountant. City/Municipal Accountant 4 3 Receives, reviews and certifies the Consolidated Pre-Closing and Post-Closing TBs. Returns the certified Consolidated Pre-Closing and Post-Closing TBs to the Barangay Bookkeeper. 5 Barangay Bookkeeper Releases the certified Consolidated Pre-Closing and Post-Closing TBs to concerned offices and retains a copy for file.

CONSILIDATION OF PRE-CLOSING AND POST-CLOSING TRIAL BALANCE Procedural Flow Chart Barangay Bookkeeper
prepares Note 1
2

City/Municipal Accountant
receives, reviews and certifies
3

PreCTB

PostCTB

CPreCTB 1-3 CPostCTB 1-3

submits

CPreCTB 1-3 CPostCTB 1-3


4

returns

releases

CPreCTB CPostCTB 1

2 2

CPreCTB CPostCTB

CPreCTB CPostCTB 3

COA-GAFMIS

COA Auditor

City/Municipal Accountant

Legend: PreCTB PCTB CPreCTB CPostCTB - Pre-Closing Trial Balance - Post-Closing Trial Balance - Consolidated Pre-Closing Trial Balance - Consolidated Post-Closing Trial Balance

Symbols:

- Flow of Documents - Records/Prepares/Foots/Extracts - File - Document

Notes

- Process
1. The Consolidated Pre-Closing Trial Balance and PostClosing Trial Balance shall be prepared in three copies to be distributed as follows: Original GAFMIS, COA, CO 2nd copy COA Auditor/ATL 3rd copy City/Municipal Accountant

Consolidation of Financial Statements Narrative Procedures Area of Responsibility/ Person Responsible Barangay Bookkeeper Seq 1 Activity Retrieves the Individual FS and prepares the Consolidated Detailed FSs (CDFS) of all the barangays of the

City/Municipality. 2 Prepares the Consolidated Detailed FSs (CCFS) based on the Consolidated Detailed FSs of all the barangays within the City/Municipality. 3 Prepares the transmittal letter for signature of the

City/Municipality Accountant transmitting the following: Consolidated Condensed FSs (BS, SIE) Consolidated Detailed FSs (BS, SIE, SCF and SCGE) Other Schedules

Note 1. The Consolidated FSs shall be prepared and distributed as follows: Original GAFMIS, COA (Central Office in printed and digital copies (diskette or compact disk)) 2nd Copy COA Auditor 3rd Copy City/Municipal Accountant 4 Forwards the transmittal letter together with the CDFS and CCFS to the City/Municipal Accountant. City/Municipal Accountant 5 Receives the transmittal letter and consolidated FSs. Checks the completeness and correctness of the Consolidated FSs, and signs the transmittal letter. 6 Forwards the signed transmittal letter and Consolidated FSs to the Barangay Bookkeeper for release. Barangay Bookkeeper 7 8 Receives the signed transmittal letter and Consolidated FSs. Releases the signed transmittal letter and Consolidated FSs to concerned Offices and retains a copy for file. Note 2. The Consolidated FSs shall be submitted within 60 days after the 31st day of December.

CONSILIDATION OF FINANCIAL STATEMENTS Procedural Flow Chart Barangay Bookkeeper City/Municipal Accountant
1

retrieves and prepares

receives, checks and signs

IFS 1-3

CDFS

Transmittal Letter

CCFS
2

1-3 CCFS 1-3


6

forwards

prepares Note 1

3 Transmittal Letter

forwards
4

Transmittal Letter

CDFS 1-3 CCFS

receives

1-3
releases Note 2

Transmittal Letter

Transmittal Letter

CDFS 3 3 CCFS 1-2

CDFS CCFS 1-2

Symbols: Legend: IFS -Individual Financial Systems CDFS - Consolidated Detailed Financial Statements CCFS - Consolidated Condensed Financial Statements

- Flow of Documents - Records/Prepares/Foots/Extracts - File - Document

Notes: 1.

- Process

2.

The Consolidated FS shall be prepared and to be distributed as follows: Original GAFMIS, COA, Central Office in printed and digital copies (diskette or compact disc) 2nd copy COA Auditor 3rd copy City/Municipal Accountant The Consolidated FS shall be submitted within 60 days after the 31 st day of December.

Duties and Responsibilities of the City/Municipal Accountant and Budget Officer The City/Municipal Accountant and Budget Officer shall perform the following duties and responsibilities for the barangay financial transactions: City/Municipal Accountant 1. Maintain the General Journal, General Ledger, Subsidiary Ledgers and Registries of PI/RP for each of the barangays under city/municipality; 2. Prepare JEV to record the financial transactions of barangays based on the certified registers and supporting documents submitted by the BRK; 3. Record the JEVs in the General Journal and post journal entries to the General Ledgers and Subsidiary Ledgers; 4. Prepare the required monthly and yearend TBs, FSs and reports/schedules for each of the barangays; 5. Prepare and submit the Bank Reconciliation Statement to COA Auditor/ATL concerned; 6. Consolidate the yearend TBs and FSs and reports/schedules of the barangays; and 7. Submit monthly and yearend barangay individual financial reports to the Sangguniang Barangay, and the printed and digital copies of the consolidated yearend TBs, FSs, and reports/schedules of the barangays together with those of the City/Municipality to GAFMIS-COA and to the Auditor/ATL concerned. Budget Officer 1. Consolidate the SACB of each barangay for the five funds. 2. Submit the CSACB of all barangays under the city/municipality to GAFMIS, COA thru the Auditor/ATL and to DBM.