SOP Library
SOP NO:
FS-FA03
(List of Exhibits/Attachments)
Missi
on
:
Finance and Administration
Area:
Financial Services (FS)
Activity:
Financial Accounting (FS-FA)
Title:
Accounting for Accrued Expenses
Date Approved/Issued:
05/20/1985
Date Effective:
06/02/1985
Digest:
I. TERMS OF REFERENCE
A. Rationale
B. Objective
C. Scope
D. Basis
II. IMPLEMENTING GUIDELINES
1.
Accrued Expenses
Accrued expenses are expenses already incurred by the NFA but are not yet paid. Payment for purposes of accrual does not mean actual cash/check payment but shall cover those expenses which are supported by processed/approved vouchers as of cut-off date (end of the month) although no actual cash/check disbursement has been made. These expenses shall be deemed paid and shall no longer be accrued.
The unpaid obligations of the NFA may already be evidenced by official invoices/bills/statements of account/other documents submitted by the creditors to support their claims for payment of services rendered to the NFA, goods purchased by the NFA and other valid claims against the NFA. Corresponding disbursement vouchers may have been prepared for these expenses which make them ready for voucher processing the succeeding month (the disbursement vouchers are not yet recorded in the Voucher Register Journal of the current month when the expenses were incurred).
There are also some NFA expenses which are fixed and recurring such as rents; water, illumination and power expenses; telephone, telegraph and postage expenses, etc... Such expenses are always incurred by the NFA although the amounts involved may be fixed or may vary. The supporting documents evidencing these expenses have not yet been submitted to the NFA by the creditors for it is customary that the current month's bills are sent in the next succeeding month. The responsible official/concerned employee is aware that such expenses were incurred by the NFA and should, therefore, be accrued.
2.
Accrual of Expenses
Incurred expenses although unpaid should be recognized and recorded in the books of accounts on the month they were incurred. Accrual of expenses on a monthly basis can be effected through the preparation of the Monthly Statement of Accrued Expenses.
3.
Statement of Accrued Expense
s
The
Statement of Accrued Expenses
(Exhibit 1) is a
summary
of expenses incurred by the NFA during the month for which corresponding payment on the same month cannot be made. The statement shall be used as basis for the preparation of a Journal Voucher to set up the accrued expenses for the month.
The
Statement
shall be prepared in 2 copies (Copy 1 Accounting; Copy 2: Section/Unit) by the Chief of the respective field offices' sections or units and approved by the Regional Director/Provincial Manager/OIC-Unit Office for submission to the Accounting Section on or before the 3rd working day of the succeeding month.
For Central Office, the responsibility for the preparation, approval and submission to the DAB of this document shall be vested upon the head of office/directorate.
In case of those expenses wherein corresponding vouchers have been prepared and submitted to the claims and Pre-Audit Division, DAB (C.O.)/Accounting Section (F.O.) but remained unprocessed, the responsibility for reporting such expenses shall be vested upon the head of the division/section.
The "REFERENCE" portion shall be accomplished by the Accounting Division/Section for control purposes. Upon payment of the accrued expense, the corresponding disbursement voucher date, number and amount shall be reflected therein as well as the journal voucher date, number and amount of adjustment in case there is an over or under set-up made.
4.
Basis of Accrual
Usual documents required in processing various claims against the NFA shall be used as basis for accruing the expenses. However in case of those expenses wherein complete documentation have not yet been submitted by the creditors, such expenses shall be accrued based on available documents.
In case of milling operations which might still be in process as of the end of the month, expenses covering services rendered for the current month asked for shall be accrued using the WSR and stock report as basis in the absence of a bill covering such services.
For other contract services like inter-island loading and unloading, arrastre, wharfage and other integrated services, accrual for such expenses shall be made on the month such services were completed using the WSR/WSI and stock report or Bill of Lading as basis in the absence of the creditor's bill.
In case of fixed and recurring expenses as given in Number 1, such may be accrued based on realistic estimates (previous bills considered) pending receipt of corresponding bills from the creditors.
The supporting documents should be stamped or marked "ACCRUED". These supporting documents need not be submitted together with the
Statement of Accrued Expense
s. Such shall only be forwarded to the claims and Pre Audit Division/Accounting Section together with the prepared disbursement voucher for processing of claims.
5.
Claims by the NFA Personnel
Generally, claims against the NFA by its personnel for services rendered (salaries, allowances, overtime pay, etc...) and/or for fringe benefits to which they are entitled to should be paid as they become due. However, there are cases wherein payment for these claims can not be made due to deficiency in the required documentation, deferment of payment of allowances/benefits pending compliance to additional requirements, etc... These expenses should be accrued and reported in the
Statement of Accrued Expense
s.
6.
Subsidiary Ledger for Accrued Expenses
Subsidiary Ledgers per Object of Expenditure indicating the creditor should be maintained to control the monthly accrual of expenses.
7.
Balance Sheet Presentation
Accrued Expenses is a current liability account under Payables - Miscellaneous. This is credited when accruals are made with a debit entry to an expense item which is either an inventory, operating or administrative cost. Inventory cost is capitalized by debiting the Inventory Account and crediting the Inventory Cost. Upon payment of the liability, a debit to accrued expenses and a credit to the vouchers payable account shall be recorded.
8.
Reversal/Adjustment of Accruals
There shall be no reversal of the accruals at the beginning of the succeeding month/year. In case an analysis of the accrued expenses to those representing payment of accrued liability and those representing the expense of the current period shall be required, such shall be derived from the appropriate subsidiary ledgers maintained for accrued expenses.
In case of an under or over set-up of accrued expenses, such shall be adjusted to the appropriate expense account if payment is made on the current year or to ROA/COCA account if payment is made on the succeeding year.
Accounting entries for sample transactions relative to Accrued Expenses are illustrated in
Exhibit 2
.
9.
Accounting Entries Relative to COA Disallowances
9.1 To set-up COA disallowances on payments of expenses which were accrued
DR: Claims for Disallowed Payments xxx
CR: Contingent Surplus xxx
9.2
Settlement/Collection of Disallowances
a. Settlement of disallowance thru submission of required documents
DR: Contingent Surplus xxx
CR: Claims for disallowance Payments xxx
b. Collection of disallowance
DR: Cash with Collecting Officer xxx
DR: Expense Account (Current year expense)
or ROA/COCA (Prior Years Expense) xxx
DR: Contingent Surplus xxx
CR: Claims for Disallowed Payments xxx
III. RESPONSIBILITIES
Field Office
1.
Regional Director/Provincial Manager/OIC
1.1 Instructs the section/unit head concerned to prepare the
Statement of Accrued Expense
s in accordance with the provisions of this SOP.
1.2 Approves the
Statement of Accrued Expense
s for submission to the Accounting Section on or before the 3rd working day of the succeeding month.
2.
Section Chief/Unit Head
Prepares the
Statement of Accrued Expense
s for approval by he Regional Director/Provincial Manager/OIC in accordance with the previsions of this SOP. Marks or stamps the corresponding supporting documents with :ACCRUED".
3.
Regional/Provincial Accountant
3.1 Based on the submitted
Statement of Accrued Expense
s for the month, effects the accrual of expenses in accordance with the accounting policies herein provided.
3.2 Accomplishes the "REFERENCE" portion of the Statement and maintains the required subsidiary ledgers for control purposes.
3.3 Prepares the necessary adjusting entries in case of an under or over set-up of accrued expenses/COA disallowances.
3.4 Accrues those expenses already covered by disbursement vouchers submitted for processing but remained unprocessed as of the end of the month when such expenses were incurred.
CENTRAL OFFICE
1.
Head of Office/Directorate
Responsible for the preparation, approval and submission of the
Statement of Accrued Expense
s to the Accounting Division as required. Sees to it that the corresponding supporting documents are marked or stamped with "ACCRUED".
2.
Chief, Accounting Division
2.1 Based on the submitted
Statement of Accrued Expense
s, effects the accrual of expenses in accordance with the accounting policies herein provided.
2.2 Accomplishes the "REFERENCE" portion of the Statement and maintains the required subsidiary ledgers for control purposes.
2.3 Prepares the necessary adjusting entries in case of an under or over set-up of accrued expenses/COA disallowances.
3.
Chief, Claims and Pre-Audit Division
Responsible for reporting those expenses already covered by disbursement voucher submitted for processing but remained unprocessed as of the end of the month when such expenses were incurred.
IV. FLOW CHART
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EXHIBITS
Accounting Entries for Sample Transactions (FS-FA03)
Statement of Accrued Expenses (FS-FA03)