Note 3 – Summary of significant accounting policies
3.1 Basis of accounting
The combined financial statements are prepared on an accrual basis in accordance
with the International Public Sector Accounting Standards (IPSAS).
3.2 Combination/Consolidation
The consolidated financial statements reflect all the assets, liabilities, revenues, and
expenses of the Municipality covering all funds. These funds include the General
Fund, Special Education Fund and Trust Fund. The General Fund is composed of the
following Special Accounts.
� General Fund Proper
� Market Operation
� Waterworks Operation
� Cemetery Operation
� 20% Development Fund
� Coastal Resource Management Program
� Solid Waste Management Program
3.3 Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and cash at bank; deposits on call
and highly liquid investments with an original maturity of three months or less, which
are readily convertible to cash and they present insignificant risk of changes in value
because of changes in interest rates.
Petty Cash Fund (PCF) is maintained under an imprest system wherein replenishment
is charged to the expense account. The PCF is not used to purchase regular inventory
items for stock.
3.4 Investments
The LGU limits its exposure to risk by investing in authorized depository banks.
3.5 Receivables
Receivables represent amounts collectible from various constituents, taxpayers, other
local government units, national government agencies, municipal officials and
employees arising from claims for money lent, real property taxes due to the local
government unit and cash advances granted or travel or for payment of salaries,
wages, allowances, honoraria and petty operating expenses.
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