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REVIEW MATERIAL FOR FINAL EXAMINATION

1. Which of the following is not an indicator of reliable measurement for an asset?

a. Benefits can be expected on the basis of available evidence or logic.
b. Valuation method is free from material error or bias.
c. Faithful representation of the asset’s benefits.
d. Reliable information will, without bias or undue error, faithfully represent those
transactions and events.

2. It refers to the disbursement authority issued by the DBM to agencies with foreign
operations allowing them to use the income collected by their Foreign Service Posts to cover
their operating requirements.
a. Notice of Cash Allocation (NCA)
b. Tax Remittance Advice (TRA)
c. Cash Disbursement Ceiling (CDC)
d. Non-Cash Availment Authority (NCAA)

3. Account titles in the Revised Chart of Accounts (RCA) are arranged according to this
sequence
a. Assets, Equity, Liability, Revenue, and Expenses
b. Assets, Liability, Equity, Revenue, and Expenses
c. Assets, Expenses, Liability, Equity and Revenue
d. In no particular order.

4. Which of the following is an indication of impairment from internal sources?

a. Significant changes with an adverse effect on the entity have taken place during the
period, or will take place in the near future, in the technological, market, economic, or
legal environment in which the entity operates, or in the market to which an asset is
dedicated.
b. During the period, an asset’s market value has declined significantly more than would be
expected as a result of the passage of time or normal use.
c. Significant changes with an adverse effect on the entity have taken place during the
period, or are expected to take place in the near future, in the extent to which, or the
manner in which, an asset is used or is expected to be used.
d. Market interest rates or other market rates of return on investments have increased
during the period, and those increases are likely to affect the discount rate used in
calculating an asset’s value in use and decrease the asset’s recoverable amount
materially.

5. Entity A, a government entity, had the following transactions during the period:
 Received Notice of Cash Allocation (NCA) amounting to ₱1,226,618.
 Earned total revenue of ₱1,598,000 from billings and collections of unbilled income.
 Incurred total expenses of ₱791,652.
 Remitted total taxes withheld of ₱87,460 to the BIR through Tax Remittance Advice
(TRA).
 The “Cash-Modified Disbursement System (MDS), Regular” has an unused balance of
₱132,196 at the end of the period.

How much is the surplus (deficit) for the period?

a. 1,988,230
b. 1,898,230
c. 1,742,320
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d. 1,988,320

Revenue 1,598,000
Expenses (791,652)
Surplus (Deficit) from operations 806,348
Subsidy from NG (NCA) 1,226,618
Subsidy from NG (TRA) 87,460
Unused NCA (132,196)
Net Financial Assistance/Subsidy 1,181,882
Surplus (Deficit) for the period 1,988,230

Use the following information for the next four questions:

Entity A grants a cash advance of ₱2,000 for the traveling expenses of an officer. Actual
expenses amount to ₱1,800. The officer remits the excess cash advance.

6. The entry to record the grant of cash advance is

a. Advances to Officers and Employees 2,000
Cash – Disbursing Officer 2,000
b. Advances to Officers and Employees 2,000
Cash – Modified Disbursement
System (MDS), Regular 2,000
c. Advances to Officers and Employees 2,000
Cash – Collecting Officer 2,000
d. Any of these.

7. The disbursement is recorded in the

a. Journal and Ledger
b. RAOD
c. ORS
d. All of these

8. The entry to record the liquidation of the cash advance is

a. Traveling Expenses – Foreign 1,800
Advances to Officers and Employees 1,800
b. Traveling Expenses – Foreign 1,800
Due to Officers and Employees 1,800
c. Cash – Collecting Officers 1,800
Advances to Officers and Employees 1,800
d. a and c

9. The entry to record the receipt and deposit of refund of excess cash advance is
a. Cash – Collecting Officers 200
Advances to Officers and Employees 200
b. Cash – Treasury/Agency Deposit, Regular 200
Cash – Collecting Officers 200
c. a and b
d. neither a nor b

10. This refers to valid and legal obligations of NGAs/OUs, for which, goods/services/projects
have been delivered/rendered/completed and accepted, regardless of the year when these
obligations were incurred.
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a. Accounts Payable
b. Obligations
c. Not Yet Due and Demandable
d. Liability

11. Which of the following is not an essential characteristic of a financial instrument?

a. There must be a contract.
b. There are at least two parties to the contract.
c. The contract gives rise to both a financial asset of one party and a financial liability or
equity instrument of another party.
d. It is subsequently measured at fair value.

12. When determining depreciation, an entity considers all of the following except
a. Initial cost
b. Useful life
c. Expected residual value at the end of the asset’s useful life
d. Whether the asset is classified as with finite or indefinite useful life.

13. Entity A spends ₱20,000 on the repair of one of its equipment. It is not clear whether the
repair is a major repair or a minor repair. In accordance with the GAM for NGAs, how
should Entity A account for the repair cost?
a. As a minor repair
b. As a major repair
c. As an addition
d. a or b

14. The Statement of Comparison of Budget and Actual Amounts is dated

a. As of the reporting date
b. For a given reporting period
c. Either a or b
d. Not dated

15. The main purpose of the Statement of Comparison of Budget and Actual Amounts is
a. to provide a basis for increasing the budget in the following fiscal year.
b. to provide information regarding the government’s financial condition vis-a-vis the
resources entrusted to it.
c. to enhance the transparency of government’s financial reporting.
d. to provide information regarding the government’s financial performance.

16. The statement of management responsibility for financial statements attached to a

government agency’s combined financial statements (operating units, regional offices, and
main office) would most likely be
a. dated not later than February 14 of the year following the reporting period.
b. dated not earlier than February 14 of the year following the reporting period.
c. signed by the agency’s Head, together with the agency’s Secretary and Treasurer.
d. none of these.

17. Entity A is a government hospital. Entity A operates a pharmacy within the hospital. Entity
A would most likely recognize revenue from sales of medicines in the pharmacy
a. upon billing, when goods are transferred to the buyer.
b. on a straight-line basis.
c. by reference to the stage of completion at the reporting date.
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d. in accordance with the substance of the relevant agreement which requires an in-depth
analysis by a CPA who studied accounting for four to five years, or more.

18. Which of the following is not one of the classifications of inventory held by a government
entity?
a. Inventory Held for Distribution
b. Inventory Held for Long-term Use
c. Inventory Held for Manufacturing
d. Inventory Held for Consumption
e. Semi-Expendable Property

19. Which of the following may not be included in the inventories of a government entity?
a. rice and other welfare goods held for distribution
b. raw materials and work-in-process
c. accountable forms
d. equipment costing ₱15,000

20. Entity A exchanges an item of PPE with Entity B. How should Entity A account for any cash
paid or received from the exchange?
a. Add the cash paid to the initial measurement of the asset received.
b. Deduct the cash paid from the initial measurement of the asset received.
c. Add the cash received to the initial measurement of the asset received.
d. Account for any cash paid or received in gain or loss but not on the initial measurement
of the asset received.

21. According to the GAM for NGAs, these assets are those which have historical, cultural and
environmental significance, and are intended to be preserved for future generations.
a. Cultural assets
b. Infrastructure assets
c. Heritage assets
d. Historical assets

Use the following information for the next two questions:

At the beginning of Year 1, a government entity acquires an intangible asset for ₱100,000. The
intangible asset has a useful life of 10 years. At the end of Year 3, the entity determines an
indication of impairment and makes the following estimates:
Fair value less costs to sell 60,000
Value in use 50,000

22. How much is the impairment loss?

a. 10,000
b. 20,000
c. 30,000
d. 0

A (100,000 x 7/10) – 60,000 = 10,000

23. At the end of Year 6, Entity A determines an indication that the previous impairment may
no longer exist and makes the following estimates:
Fair value less costs to sell 32,000
Value in use 38,000
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How much is the gain on the reversal impairment loss?

a. 3,714
b. 5,714
c. 8,714
d. 0

Recoverable amount (VIU – higher): 38,000

CA had no I.L. been recognized in previous period:
(100,000 x 4/10) = 40,000
CA after the I.L: (60,000 x 4/7) 34,286
Gain on reversal of I.L. = (38,000* – 34,286) = 3,714

* Lower than CA had no I.L. been recognized in previous period

24. Entity A leased a new machine to Entity B on January 1, 20x1. The lease expires on
January 1, 20x6. The annual rental is ₱90,000. Additionally, on January 1, 20x1, Entity B
paid ₱50,000 to Entity A as a lease bonus and ₱25,000 as a security deposit to be refunded
upon expiration of the lease. In Entity A's 20x4 statement of financial performance, the
amount of rental revenue should be
a. 140,000
b. 125,000
c. 100,000
d. 90,000

C [90,000 + (50,000 ÷ 5 years)] = 100,000

25. Which of the following statements is correct regarding the presentation of financial
statements by government entities?
a. Changes in accounting policies may be accounted for by prospective application.
b. Non-adjusting events are never recognized but are always disclosed.
c. Prior period errors are corrected by retrospective application.
d. Just like business entities, government entities may (if they choose to) prepare interim
financial statements on a quarterly basis.

26. The notes to the financial statements is least likely to be expected to show which of the
following information?
a. General information on the reporting entity.
b. Current and noncurrent distinctions of assets and liabilities.
c. Statement of compliance with the PPSAS and basis of preparation of financial
statements.
d. Summary of significant accounting policies.

27. A change in accounting estimate is accounted for

a. using the transitional provision, if any.
b. by retrospective application.
c. by prospective application.
d. any of these

28. This is attached to the annual general purpose financial statements of a government entity
as a cover letter.
a. President’s Budget Message
b. Report on Highlights and Executive Summary
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c. Statement of Management Responsibility for Financial Statements

d. Dedications, acknowledgments and best wishes.

29. The main purpose of the statement of comparison of budget and actual amounts is
a. to apply the concepts of responsibility accounting.
b. to enhance the transparency of financial reporting of the government.
c. to show information not presented on the face of the other components of a complete
set of general purpose financial statements.
d. to provide vital information needed in impeachment proceedings.

30. The operator in a service concession arrangement is a

a. government entity
b. private entity
c. separate entity
d. jeepney

31. Which of the following applies to business entities but not to government entities?
a. Finance lease accounting by lessors.
b. Noncurrent asset held for sale classification.
c. Direct method of presenting cash flows from operating activities.
d. Cash equivalents classification for debt instruments acquired three months before their
maturity date.

32. Which of the following applies to business entities but not to government entities?
a. Accounting for biological assets at fair value less costs to sell.
b. Preparation of interim financial statements.
c. Presenting information on earnings per share.
d. Continued depreciation of idle equipment.

33. The accounting for government entities differs from the accounting for business entities in
which of the following respects?
a. Accounting for exchanges of property, plant and equipment.
b. Accounting for exchanges of intangible assets.
c. Accounting policy choice for the subsequent measurement of investment property.
d. Classification of intangible assets as either with finite or with indefinite useful life for
purposes of subsequent measurement.

34. Which of the following statements is correct?

a. All disbursements shall be made through Disbursement Vouchers (DVs) or Payroll
which are approved by the Head of the Requisitioning Unit.
b. The Non-Cash Availment Authority (NCAA) is a disbursement authority issued to
government agencies with foreign service posts.
c. According to the GAM for NGAs, the Advice to Debit Account (ADA) mode of
disbursement can be used only if the payee maintains an account in the same bank
where the government entity maintains its account.
d. Disbursements through the Cash Disbursement Ceiling (CDC) results to the recognition
of a loan payable in the books of accounts of the BTr.
e. Under the Advice to Debit Account (ADA) mode of disbursement, payments from a
government entity are directly credited to the bank accounts of the payees through
bank transfers.
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35. The accounting for government entities differs from the accounting for business entities in
which of the following respects?
a. Classification of joint ventures.
b. Consolidation procedures when preparing consolidated financial statements.
c. Disclosure of events after the reporting date.
d. Impairment requirements, and reversals thereof, for noncurrent assets.

36. The statement of cash flows of government entities

a. shows the historical changes in cash and cash equivalents
b. shows prospective information on budgeted amounts of expected future cash flows
c. a and b
d. is prepared using the accrual basis of accounting

37. The classification of leases under the GAM for NGAs is based on
a. the form of the contract rather than the substance of the transaction.
b. the extent of transfer of risks and rewards incidental to ownership of the leased asset
from the lessor to the lessee.
c. the significance in value of the leased asset.
d. the significance in value of the leased asset and the length of the lease term.

38. Lessee enters into a lease contract with Lessor. Which of the following would most likely
indicate a substantial transfer of risks and rewards incidental to ownership of an asset?
a. The lease term is 10 years for an annual lease payment of ₱5,000,000.
b. Lessee has the option to extend the lease for the remaining half of the leased asset’s
useful life for the same amount of annual lease payment which is expected to be lower
than the market rate during the extended period.
c. The lease transfers ownership of the leased asset to the Lessee if the Lessee pays the
Lessor the leased asset’s fair value, to be determined on payment date.
d. The Lessee has the unilateral right to cancel the lease after the first 5 years of the lease
term without any significant costs.

39. On the statement of activities for a private not-for-profit institution, the account, net assets
released from restrictions, would be shown under revenues, gains, and other support as a
(use SFAS 117 in answering this question)
a. Decrease in permanently restricted and an increase in temporarily restricted net assets.
b. Decrease in restricted and an increase in temporarily restricted net assets
c. Decrease in temporarily restricted and increase in permanently restricted net assets.
d. Decrease in temporarily restricted and increase in unrestricted net assets.

40. A statement of functional expenses is required for which of the following private not-for-
profit institutions? (use SFAS 117 in answering this question)
a. Hospital
b. Voluntary Health and Welfare Organization
c. Fraternal Organization
d. College

41. A government entity derecognizes which of the following?

a. Idle PPE
b. Unserviceable PPE
c. Fully depreciated PPE
d. Partially damaged PPE
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42. Entity A, a government entity, receives notice that for the current year, the maximum
amount it can spend on maintenance and other operating expenses is ₱10B. This event can
be described as
a. Notice of Cash Allocation
b. Allotment
c. Appropriation
d. Budgetication

43. Which of the following statements is incorrect regarding the accounting for unreleased
checks by a government entity?
a. The accounting procedures for unreleased checks prescribed under the GAM for NGAs
apply only to commercial checks.
b. Unreleased checks are reverted back to cash.
c. At the start of the year, a reversing entry is made for the unreleased checks in the
previous year.
d. Unreleased checks are perforated.

44. On January 1, 20x1, the biological assets of Entity A consist of two 1-year old animals with
fair value less costs to sell of ₱1,000 each.

The following transactions occurred during the period:

 On July 1, 20x1, two 1-year old animals are acquired for ₱1,100 each, equal to the FVLCS
on this date.
 On October 1, 20x1, two animals are born. The FVLCS of a newborn on this date is ₱500.

The FVLCS on December 31, 20x1 are as follows:

Age FVLCS
new born ₱600
3 mos. old ₱800
1 yr. old ₱1,200
1.5 yr. old ₱1,500
2 yrs. old ₱2,000

How much is the total gain from the change in FVLCS during the period?
a. 3,800
b. 4,200
c. 4,400
d. 4,800

Solution:
beg. (1,000 x 2) + (1,100 x 2) = 4,200
end. (2,000 x 2) + (1,500 x 2) + (800 x 2) = 8,600
total gain = (8,600 – 4,200) = 4,400

45. An office equipment representative has a machine for sale or lease. If you buy the machine,
the cost is ₱7,596. If you lease the machine, you will have to sign a non-cancelable lease
and make 5 payments of ₱2,000 each. At the time of the last payment you will receive title
to the machine. The first payment will be made one period after the first day of the lease.
The interest rate implicit in this lease is approximately
a. 10%
b. 12%
c. Between 11% and 12%
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d. 16%

PV = Cash flows x PV factor

7,596 = 2,000 x PV ordinary annuity @ x%, n=5

First trial @ 10%:

(2,000 x PV ordinary annuity @ 10%, n=5) = 7,596
(2,000 x 3.7908) = 7,582
7,582 approximates 7,596; a difference of only 14

46. If plotted on a graph, the periodic interest expenses recognized on bonds issued at a
premium will show a: (X axis – time; Y axis - ₱)
a. straight line
b. downward line sloping to the right
c. upward line sloping to the right
d. curvilinear line sloping here and there

47. Which of the following information is not reported in the statement of changes in net
assets/equity?
a. Effects of current period errors.
b. Surplus or deficit for the period
c. Items of revenue and expense that are recognized directly in equity
d. The balance of accumulated surpluses or deficits at the beginning of the period and at
the reporting date, and the changes during the period.

48. Which of the following is not one of the special journals prescribed by the GAM for NGAs?
a. Sales Journal
b. Cash Disbursements Journal
c. Check Disbursements Journal
d. Cash Receipts Journal

49. The 8-digit Revised Chart of Accounts (RCA) Code for revenues starts with number
a. 1
b. 5
c. 2
d. None of these

50. Which of the following does not affect the amount of surplus or deficit that is reported in
the statement of financial performance?
a. receipt of NCA
b. constructive remittance of taxes withheld through TRA
c. closing of the “Cash-Treasury/Agency Deposit, Regular” account
d. adjustment of the “Cash-Modified Disbursement System (MDS), Regular” account for
the unused Notice of Cash Allocation.
e. All of these affect surplus or deficit.

51. Guil College, a private not-for-profit college, received the following cash inflows:
 $400,000 from students for tuition.
 $200,000 from a donor who stipulated that the money be invested indefinitely and the
earnings used for student scholarships.
 $100,000 from a donor who stipulated that the money be spent according to the wishes
of the Board of Trustees.
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Which amounts of these cash flows should be shown on the cash flow statement as cash from
operating activities?
a. $700,000.
b. $400,000.
c. $600,000.
d. $500,000.

400,000 tuition + 100,000 unrestricted = 500,000

52. On December 30, 19X4, Leigh Museum, a not-for-profit organization, received a $7,000,000
donation of Day Co. shares with donor stipulated requirements as follows:
 Shares valued at $5,000,000 are to be sold with the proceeds used to erect a public
viewing building.
 Shares valued at $2,000,000 are to be retained with the dividends used to support
current operations.

Leigh adopted of FASB Statement No. 117, Financial Statements of Not-for-Profit

Organizations. As a consequence of the receipt of the Day shares, how much should Leigh
report as temporarily restricted net assets on its 19X4 statement of financial position?
a. $0
b. $2,000,000
c. $5,000,000
d. $7,000,000

53. CIBA, a non-profit performing arts organization, received a contribution of a term

endowment and a regular endowment. These endowments should be reported on the
statement of activities as:
Term Endowments Regular Endowments
a. Permanently restricted Permanently restricted
b. Temporarily restricted Permanently restricted
c. Temporarily restricted Temporarily restricted
d. Unrestricted Temporarily restricted

54. Vista, a voluntary health and welfare organization, received a donation of $100,000 to be
spent in accordance with the wishes of the institution’s Board of Trustees. This donation
should be reported on the statement of activities as:
a. Unrestricted revenue.
b. Other income – gifts.
c. Temporarily restricted revenue
d. Permanently restricted revenues

55. Ellen College, a private not-for-profit institution, received a $100,000 grant for faculty
research in 20x1. The grant money was not spent until 20x2. For 20x1, Ellen College
should report the contribution as:
a. Unrestricted revenue
b. Temporarily restricted revenue.
c. Other operating revenue.
d. Other non-operating revenue.

56. An NPO hospital has the following account balances:

Amount charged to patients $500,000
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Revenue from newsstand 15,000

Undesignated gifts 40,000
Contractual adjustments 70,000
Interest income 12,000
Salaries expense – nurses 120,000
Bad debts 8,000

What is the hospital’s net patient service revenue?

a. $422,000
b. $430,000
c. $500,000
d. $540,000

(500,000 – 70,000) = 430,000

57. Home Care, Inc., a nongovernmental voluntary health and welfare organization, received
two contributions in 2003. One contribution of $250,000 was restricted for use as general
support in 2004. The other contribution of $200,000 carried no donor restrictions. What
amount should Home Care report as temporarily restricted contributions in its 2003
statement of activities.
a. $450,000
b. $250,000
c. $200,000
d. $0

58. The Weyman Hospital, a private, not-for-profit institution, reported the following
information:

Gross patient service revenue $1,000,000

Allowance for discounts to hospital employees 20,000
Bad debt expense 40,000
Contractual adjustments 100,000

What amount should the hospital report as net patient service revenue?
a. 840,000
b. 900,000
c. 880,000
d. 980,000

59. A private not-for-profit hospital provided $150,000 in charity care for the current year. The
hospital should report this charity care as
a. Net patient service revenue of $150,000 and patient care expense of $150,000.
b. Net patient service revenue of $150,000 on the statement of operations.
c. Only in the notes to the financial statements.
d. As an unpaid accounts receivable on the balance sheet.

60. The Johnson Hospital, a private not-for-profit hospital, received the following revenues in
the current year:
Proceeds from sales of the Hospital’s flower shop $60,000
Dividends and interest revenue not restricted $20,000
Cash contributions for the renovation of the children’s ward in the Hospital $200,000
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Which of these amounts should be reported as other revenues and gains (other revenue) on the
Statement of Operations?
a. $280,000
b. $60,000
c. $80,000
d. $260,000

61. A hospital has the following account balances:

Revenue from newsstand $ 50,000
Amounts charged to patients 800,000
Interest income 30,000
Salary expense – nurses 100,000
Bad debts 10,000
Undesignated gifts 80,000
Contractual adjustments 110,000
What is the hospital’s net patient service revenue?
a. $880,000
b. $800,000
c. $690,000
d. $680,000

62. Electra, a not-for-profit performing arts organization, held some donor restricted
endowment funds which are invested in stocks that are listed on the NY Stock Exchange,
so the fair values are readily determinable. Most of the investments represent amounts
between 2% and 5% of the outstanding common stock of the investee corporations.
However, Electra does own stock in one company that gives it the ability to exercise
significant influence over the operating and financing policies of the investee company. How
should these two types of investments be reported on Electra’s Statement of Financial
Position at year end?
Equity Securities Equity Securities
2% - 5% ownership significant influence
a. Fair value Fair value
b. Equity method Equity method
c. Fair value Equity method
d. Fair value Carrying value

63. A private not-for-profit performing arts center receives the following three donations:
 A gift of $90,000 which is unrestricted.
 A gift of $125,000 restricted for payment of salaries.
 A gift of $200,000 that is restricted forever but the income from the gift may be used for
current expenditures.

Which of the following is not true?

a. Temporarily restricted net assets increased by $125,000.
b. Permanently restricted net assets increased by $325,000.
c. When the money is spent for salaries, unrestricted net assets increase and decrease by
the same amount.
d. When the money is spent for salaries, temporarily restricted net assets decrease.

64. Cash flows from a public university bookstore would appear on the statement of cash flows
as
a. Cash flows from operations.
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b. Cash flows from investing activities.

c. Cash flows from financing activities.
d. Cash flows from noncapital financing

65. Which one of the following is not a required financial statement for a private voluntary
health and welfare organization?
a. Statement of Financial Position
b. Statement of Activities and Changes in Net Assets
c. Statement of Fund Balance
d. Statement of Cash Flows
e. Statement of Functional Expense

66. Gerlack College, a private, not-for-profit institution, received a donation of $2,000,000 as a

challenge grant. If the college raises an additional $2,000,000 within the next two years, it
may keep the donation. If it fails, the $2,000,000 must be returned to the donor. How
would the college record the receipt of the grant?
a. Unrestricted revenue.
b. Temporarily restricted revenue.
c. Note to the financial statement.
d. Refundable advance.

67. Which of the following transactions of a private voluntary health and welfare organization
would increase temporarily restricted net assets in the statement of activities for the
current year?
I. Received a contribution of $20,000 from a donor in the current year who stipulated that
the money not be spent until the following year.
II. Spent $25,000 for fund raising during the current year from a donation from the
previous year.
a. I only
b. I & II
c. II only
d. Neither

68. On December 31, 20X1, the Board of Trustees of a private, not-for-profit college designated
$5,000,000 of unrestricted net assets for the construction of an addition to the music
building. What effect does this designation have on the college’s unrestricted and
temporarily restricted net assets shown on the statement of financial position on December
31, 20X1?
Unrestricted Net Assets Temporarily restricted Net Assets
a. Decrease Increase
b. Decrease No effect
c. No effect Increase
d. No effect No effect

69. The following contributions were received by a private voluntary health and welfare
organization. Which of these would not be recorded as an increase in unrestricted revenue?
a. A carpenter donated labor and materials for the construction of a deck.
b. A painter donated paint and labor to paint all the meeting rooms.
c. A retired college professor donated reading services to senior citizens. The organization
would not have paid for these services if they had not been donated.
d. A CPA firm donated its services to audit the financial statements for the past year.
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70. In November 20x1 Gilmore Heating and Air Conditioning Service repaired the air
conditioning system for GenCare, a voluntary health and welfare organization and mailed
an invoice for $3,000. On December 25, a note was received by GenCare indicating that
Gilmore was canceling the invoice and that repairs were being donated. For the year ended,
December 31, 20x1, GenCare should report these contributed services as:
a. A footnote.
b. No disclosure is required but a thank-you note was mailed to Gilmore.
c. An increase in unrestricted revenues and an increase in expenses on the statement of
activities.
d. An increase in temporarily restricted net assets in the statement of activities.

71. Which of the following types of health care organizations recognize depreciation expense?
Investor-Owned Not-for-Profit Organizations Governmental Health Care
Health Care Enterprises Organizations
a. Yes Yes No
b. Yes No Yes
c. No No Yes
d. Yes Yes Yes

72. Entity A, a government entity, has an unused NCA of ₱50,000 at the end of the current
year. The entry to record the reversion of unused NCA is
a. Subsidy from National Government
Cash-Modified Disbursement 50,000
System (MDS), Regular 50,000
b. Accumulated Surplus/(Deficit) 50,000
Cash-Treasury/Agency Deposit,
Regular 50,000
c. Subsidy from National Government 50,000
Cash-Collecting Officers 50,000
d. No journal entry.

73. During the period, Entity A, a government entity, withheld ₱100,000 taxes from its
payments to employees and suppliers. On September 14 of the current year, Entity A
remitted the taxes withheld to the BIR through Tax Remittance Advice. The entry to record
the remittance includes
a. Cash-Tax Remittance Advice 100,000
Due to BIR 100,000
b. Subsidy from National Government 100,000
Cash-Tax Remittance Advice 100,000
c. a and b
d. None of these.

74. The entry to record the granting of cash advance for payroll fund is
a. Salaries and Wages, Regular xxx
Personal Economic Relief Allowance (PERA) xxx
Due to BIR xxx
Due to GSIS xxx
Due to Pag-IBIG xxx
Due to PhilHealth xxx
Due to Officers and Employees xxx
b. Advances for Payroll xxx
Cash-Modified Disbursement
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System (MDS), Regular xxx

c. Due to Officers and Employees xxx
Advances for Payroll xxx
d. Cash-Collecting Officers xxx
Advances for Payroll xxx

75. Entity A, a government entity, bills ₱200,000 for Communications Network Fees. Which of
the following is the correct entry for the billing?
a. Cash-Collecting Officers 200,000
Communications Network Fees 200,000
b. Cash-Modified Disbursement System (MDS), Regular 200,000
Communications Network Fees 200,000
c. Accounts receivable 200,000
Subsidy from National Government 200,000
a. Accounts receivable 200,000
Communications Network Fees 200,000

76. During the period, Entity A, a government entity approved a ₱400,000 payroll and granted
the Disbursing Officer a cash advance of ₱280,000, net of withholding taxes and
contributions to GSIS, PhilHealth and Pag-IBIG. The pro-forma entry to record the
liquidation of the payroll fund is
a. Salaries and Wages, Regular xxx
Personal Economic Relief Allowance (PERA) xxx
Due to BIR xxx
Due to GSIS xxx
Due to Pag-IBIG xxx
Due to PhilHealth xxx
Due to Officers and Employees xxx
b. Advances for Payroll xxx
Cash-Modified Disbursement
System (MDS), Regular xxx
c. Due to Officers and Employees xxx
Advances for Payroll xxx
d. Cash-Collecting Officers xxx
Advances for Payroll xxx

77. The receipt of an inter-agency fund transfer is recorded as

a. Cash-Collecting Officers xxx

Subsidy from National Government xxx
b. Cash-Modified Disbursement System (MDS), Regular xxx
Due to (Central Office, Regional Office, xxx
Operating Units or Other Funds)
c. Cash-Collecting Officers xxx
Due to (Central Office, Regional Office, xxx
Operating Units or Other Funds)
d. Cash-Modified Disbursement System (MDS), Regular xxx
Accumulated Surplus (Deficit) xxx

78. The entry to close the “Cash-Treasury/Agency Deposit, Regular” account at the end of the
period is
a. Accumulated Surplus/(Deficit) xxx
Cash-Treasury/Agency Deposit,
Regular xxx
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b. Subsidy from National Government xxx

Cash-Treasury/Agency Deposit,
Regular xxx
c. Cash-Collecting Officers xxx
Cash-Treasury/Agency Deposit,
Regular xxx
d. None of these. The account is not closed.

79. Entity A, a government entity, has withheld a total of ₱800,000 from the salary payments to
its employees representing contributions to the GSIS, Pag-IBIG and PhilHealth. The pro-
forma entry to record the remittance of the contributions to the GSIS, Pag-IBIG or
PhilHealth is
a. Due to GSIS/ Pag-IBIG/ PhilHealth xxx
Cash-Tax Remittance Advice xxx
b. Due to GSIS/ Pag-IBIG/ PhilHealth xxx
Cash-Collecting Officers xxx
c. Due to GSIS/ Pag-IBIG/ PhilHealth xxx
Cash-Modified Disbursement
System (MDS), Regular xxx
d. No journal entry.

80. The entry to record the receipt of a disbursement authority in the form of Cash
Disbursement Ceiling (CDC) is
a. Cash-Constructive Income Remittance xxx
Subsidy from National Government xxx
b. Accounts Payable xxx
Subsidy from National Government xxx
c. Accounts Payable xxx
Cash-Modified Disbursement System (MDS), Regular xxx
d. Cash-Modified Disbursement System (MDS), Regular xxx
Subsidy from National Government xxx

81. Which of the following statements is incorrect?

a. The various registries maintained by government entities primarily serve as internal
control for controlling and monitoring the conformance of actual results with the
approved budget.
b. The GAM for NGAs requires the Collecting Officer to issue an official receipt to
acknowledge the receipt of the Notice of Cash Allocation.
c. A check disbursement is normally recorded as a credit to the “Cash-Modified
Disbursement System (MDS), Regular” account.
d. Both the ORS and RAOD are updated each time an obligation is incurred, a payable is
recorded for the obligation incurred, and disbursements are made to settle the recorded
payables.
e. At the end of each year, an adjustment is made to revert any unused NCA of a
government entity.

82. An entity accrues salaries and wages after approval of payroll. The entry is

a. Salaries and Wages, Regular xxx

Personal Economic Relief Allowance (PERA) xxx
Cash-Modified Disbursement System (MDS),
Regular xxx
b. Salaries and Wages, Regular xxx
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Personal Economic Relief Allowance (PERA) xxx

Advances to Officers and Employees xxx
c. Salaries and Wages, Regular xxx
Personal Economic Relief Allowance (PERA) xxx
Due to BIR xxx
Due to SSS xxx
Due to Pag-IBIG xxx
Due to PhilHealth xxx
Due to Officers and Employees xxx
d. Salaries and Wages, Regular xxx
Personal Economic Relief Allowance (PERA) xxx
Due to BIR xxx
Due to GSIS xxx
Due to Pag-IBIG xxx
Due to PhilHealth xxx
Due to Officers and Employees xxx

83. This type of budget is prepared in such a way that estimated revenues exceed estimated
expenditures.
a. Balanced budget
b. Obligations budget
c. Excess budget
d. Budget meal

84. Entity A, a government entity, receives its Notice of Cash Allocation amounting to
₱5,000,000 for the year. The journal entry to record this event is
a. Cash-Modified Disbursement System (MDS), Regular 5,000,000
Subsidy from National Government
5,000,000
b. Cash-Collecting Officers 5,000,000
Subsidy from National Government 5,000,000
c. Cash-Tax Remittance Advice 5,000,000
Due to the National Government 5,000,000
d. No journal entry.

85. Entity A, a government entity, receives notice of its ₱10M appropriation for the year. The
journal entry to record this event is
a. Cash-Modified Disbursement System (MDS), Regular 10,000,000
Subsidy from National Government
10,000,000
b. Cash-Collecting Officers 10,000,000
Subsidy from National Government 10,000,000
c. Cash-Tax Remittance Advice 10,000,000
Due to the National Government 10,000,000
d. No journal entry.

86. Entity A, a government entity, receives its ₱9M allotment. The journal entry to record this
event is
a. Cash-Modified Disbursement System (MDS), Regular 9,000,000
Subsidy from National Government
9,000,000
b. Cash-Collecting Officers 9,000,000
Subsidy from National Government 9,000,000
c. Cash-Tax Remittance Advice 9,000,000
 P a g e | 18

Due to the National Government 9,000,000

d. No journal entry.

87. Which of the following statements is correct?

a. All disbursements require prior certifications to establish their validity and legality. A
certification for fictitious obligation is void and results to criminal liability by the
certifying officials.
b. After the budget call from the DBM, the proposed budget of various agencies are
submitted immediately to the Office of the President for review.
c. An entity can incur obligations after receiving notice of its appropriation but before
receiving the allotment.
d. Budget deliberations in the Congress starts in the House of Senate.
e. A government entity can make disbursements even before it receives a disbursement
authority.

88. The journal entry to record the collection of unbilled tax revenue (e.g., Travel Tax) through
direct deposit in Authorized Agent Banks is
a. Accounts Receivable xxx
Travel Tax xxx
b. Cash-Modified Disbursement System (MDS), Regular
Travel Tax xxx
xxx
c. Cash-Collecting Officers xxx
Travel Tax xxx
d. Cash-Treasury/Agency Deposit, Regular xxx
Travel Tax xxx

89. Which of the following reflects a Non-Cash Availment Authority (NCAA) mode of
disbursement?
a. Accounts Payable xxx
Cash-Constructive Income
Remittance xxx
b. Accounts Payable xxx
Cash – Modified Disbursement
System (MDS), Regular xxx
c. Accounts Payable xxx
Subsidy from National Government xxx
d. None of these.

90. Arrange the following steps in the budget process according to the sequence that they
appear in the budget cycle.

I. Allotment
II. Bicameral deliberations
III. Budget accountability reports
IV. President’s enactment of the GAA
V. Budget hearings with the DBM

a. V, IV, II, I and III

b. II, V, II, I and III
c. V, II, IV, I and III
d. V, I, II, IV and III
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91. Arrange the following steps in the budget process according to the sequence that they
appear in the budget cycle.

I. Allotment
II. Disbursement authority
III. Disbursement
IV. Appropriation
V. Incurrence of obligation

a. IV, I, II, V and III

b. IV, I, V, II and III
c. IV, I, V, III and II
d. IV, V, I, II and III

92. It is an authorization issued by the DBM to NGAs to incur obligations. It is also referred to
as Obligational Authority.
a. Appropriation
b. Budget call
c. Allotment
d. Budget hearings

93. A journal entry with a credit to the “Cash-Modified Disbursement System (MDS), Regular”
account will most likely be recorded in the
a. General Journal
b. Cash Disbursements Journal
c. Special Journal
d. Check Disbursements Journal

94. Which of the following is a non-exchange transaction?

a. Leasing
b. Rendering of legal services
c. Collection of taxes
d. Collection of tuition fees

95. Entity A enters into a long-term contract to provide services. The outcome of the
transaction can be estimated reliably and the progress on the contract can be measured
with sufficient reliability. According to the PPSAS, how should Entity A recognize revenue
from the contract?
a. On a straight line basis over the contract term.
b. By reference to the stage of completion of the contract at the reporting date.
c. Full recognition of contract price upon completion of the contract.
d. Only to the extent of costs that are expected to be recovered.

96. According to the GAM for NGAs, interest revenue is recognized

a. on a time proportion basis using the effective interest method.
b. on a straight line basis.
c. in accordance with the substance of the relevant loan agreement.
d. when the entity’s right to receive payment is established.

97. Which of the following statements is correct?

a. The budget preparation in the Philippines uses a “bottom-up” approach. Under this
approach, the budget preparation starts from the highest levels of the government down
to the lowest levels.
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b. Government entities and business entities use the term “obligation” or the phrase
“incurrence of obligation” similarly.
c. The only valid modes of disbursement for a government entity are through cash or
check.
d. A government entity must first receive an allotment before it can incur obligations.
e. An entity prepares its budget by simply rolling-over the budget in the previous year and
adjusting each line item by 10% increment to reflect inflation. This process is described
as zero-based budgeting.

98. The taxable event for Value added tax (VAT) is the
a. undertaking of a taxable activity.
b. earning of taxable income.
c. movement of dutiable goods or services across the customs boundary.
d. any of these

99. Which of the following would result to an increase or decrease in the revenue reported by a
government entity in its statement of financial performance?
a. Impairment loss on an amount already recognized as revenue.
b. Receipt of a pledge.
c. Receipt of donation in the form of services in kind.
d. The repayment of a loan payable is forgiven.

100. Which of the following statements is incorrect?

a. The Notice of Cash Allocation (NCA) is an authority issued by the DBM to central,
regional and provincial offices and operating units to cover their cash requirements.
b. Responsibility accounting greatly enhances budget accountability because managers
are evaluated only in terms of the costs or other variables that they control, and
therefore, budget deviations can be readily attributed to the managers accountable
therefor.
c. Technically, only the Journals and Ledgers are considered accounting records; the
Registries are budget records.
d. Appropriation is also called obligational authority.
e. Separate accounting records and budget registries are maintained for each fund cluster.