L-NU AA-23-02-01-18

LYCEUM-NORTHWESTERN UNIVERSITY
Tapuac District, Dagupan City

COLLEGE OF BUSINESS EDUCATION

Midterm Examination – Accounting for Government & Non-profit Organizations

2nd Semester, A.Y. 2021-2022
Prepared by: Judy Anne T. Ramirez, CPA, MBA

Name: _______________________ Score: _________________

Student No: _______________________ Date of Examination: _________________

Multiple Choice. Choose the option of the best answer.

1. The various registries maintained by government entities are considered, technically, as

a. Book of Accounts c. General Ledgers
b. Budget Records d. Log books

2. Which of the following is recorded in the Obligation Request and Status (ORS)?
a. Receipt of notice of appropriation
b. Receipt of allotment from DBM
c. Receipt of Notice of Cash Allocation from the DBM
d. Entering into employment contracts with employees

3. This type of expenditure pertains to all types of employee benefits.

a. Personal Services (PS)
b. Maintenance and Other Operating Expenses (MOOE)
c. Financial Expenses (FE)
d. Capital Outlays (CO)

4. Entity A, a government entity, made disbursements for the travelling expenses of its personnel.
These expenditures are most likely classified as
a. Personal Services (PS)
b. Maintenance and Other Operating Expenses (MOOE)
c. Financial Expenses (FE)
d. Capital Outlays (CO)

5. Which of the following is charged with the responsibility of keeping the general accounts and
related documents of the government?
a. Commission on Audit (COA)
b. Bureau of Treasury (BTr)
c. National Government Agencies (NGAs)
d. Department of Budget and Management (DBM)

6. A journal entry with a credit to the "Cash-Modified Disbursement System, Regular" account will
most likely be recorded in the
a. General Journal c. Cash Disbursements Journal
b. Special Journal d. Check Disbursements Journal

7. Which of the following accounts is debited when a government entity remits its collections to the
National Treasury?
a. Cash - Tax Remittance Advice
b. Cash - Modified Disbursement System (MDS), Regular
c. Cash - Treasury/Agency Deposit, Regular
d. Cash - Collecting Officer

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8. Which of the following accounts is credited when a government entity remits taxes withheld to the
BIR?
a. Cash - Tax Remittance Advice
b. Cash - Modified Disbursement System (MDS), Regular
c. Cash - Treasury/Agency Deposit, Regular
d. Cash - Collecting Officer

9. Which of the following accounts is credited when a government entity remits contributions to the
GSIS, PhilHealth and Pag-IBIG?
a. Cash - Tax Remittance Advice
b. Cash - Modified Disbursement System (MDS), Regular
c. Cash - Treasury/Agency Deposit, Regular
d. Cash - Collecting Officer

10. Obligations recorded in the registries but not yet in the accounting books are referred to as
a. Not yet due and demandable c. Erroneous recording
b. Contingent liabilities d. Unpaid obligations

11. The receipt of an appropriation is recorded by a government entity in the

a. RAOD c. RAPAL
b. ORS d. a and c

12. The incurrence of an obligation for future delivery of performance by the obligee is recorded by a
government entity in the
a. RAOD c. RAPAL
b. ORS d. a and b

13. The receipt of an appropriation is recorded by a government entity in the

a. RAOD c. RAPAL
b. ORS d. a and b

14. The entry to record the receipt of Notice of Cash Allocation (NCA) by a government entity is:
a. (Debit) Cash-Modified Disbursement System (MDS), Regular
(Credit) Accumulated Surplus (Deficit)
b. (Debit) Cash-Modified Disbursement System (MDS), Regular
(Credit) Subsidy form National Government
c. (Debit) Cash-Collecting Officer
(Credit) Subsidy from National Government
d. No journal entry. The event is recorded only in the Registries.

15. According to the Revised Chart of Accounts (RCA) issued by the COA, the “Subsidy from National
Government” account is a(an)
a. Asset account c. Revenue account
b. Liability account d. Equity account

16. Which of the following is not one of the necessary closing entries of a government entity?
a. Closing of the “Cash-Treasury/Agency Deposit, Regular” account to the “Accumulated
Surplus/(Deficit)” account.
b. Closing of the “Subsidy from National Government” account to the “Revenue and Expense
Summary” account.
c. Closing of income and expense accounts to the “Revenue and Expense Summary” account.
d. Closing of the net balance of “Revenue and Expense Summary” account to the “Subsidy from
National Government” account.

17. A government entity pays accounts payable. The entry to record the payment will most likely include
a. debit to the “Cash-Modified Disbursement System (MDS), Regular” account.
b. credit to the “Due to BIR” account.
c. credit to the “Cash-Treasury/Agency Deposit, Regular” account.

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d. None of these. The event is recorded only in the Registries and the Obligation Request and
Status.

18. In accordance with the GAM for NGAs and the Revised Chart of Accounts, how does a government
entity recognize the uncollectability of accounts receivable?
a. By debiting the “Bad Debts Expense” account.
b. By debiting the “Impairment Loss-Loans and Receivables” account.
c. By debiting the “Allowance for Impairment-Accounts Receivable” account.
d. b and c

19. The “Subsidy from National Government” account is credited when recording a
a. receipt of NCA
b. reversion of unused NCA
c. constructive remittance of customs duties or taxes withheld through TRA
d. a and c

20. Expenditures to acquire long-term assets are most likely classified as

a. Personal Services (PS)
b. Maintenance and Other Operating Expenses (MOOE)
c. Financial Expenses (FE)
d. Capital Outlays (CO)

21. This is used to recognize the constructive remittance of taxes withheld to the BIR or customs duties
withheld to the BOC.
a. Tax Remittance Advice (TRA)
b. Notice of Tax Allocation (NTA)
c. Tax and Customs Remittance Advice (TCRA)
d. Notice of Tax Remittance Advisory (NTRA)

22. 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

23. Entity A received Notice of Cash Allocation (NCA) amounting to P625,000 for the year. Unused NCA
at the end of the period amount to P6,000. Entity A remitted taxes withheld to the BIR amounting to
P48,000 through Tax Remittance Advice (TRA). How much is the “Net Financial Assistance/Subsidy”
to be reported in Entity A’s statement of financial performance?
a. 667,000 c. 571,000
b. 619,000 d. 0

24. Entity A, a government entity, had the following transactions during the period:
 Received Notice of Cash Allocation (NCA) amounting to P750,000.
 Earned total revenue of P290,000 from billings and collections of unbilled income.
 Incurred total expenses of P885,000.
 Remitted total taxes withheld of P140,000 to the BIR through Tax Remittance Advice (TRA).
 The “Cash-Modified Disbursement System (MDS), Regular” has an unused balance of P43,000 at
the end of the period.
How much is the surplus (deficit) for the period?
a. (595,000) c. 252,000
b. 155,000 d. 112,000

25. The trial balances of Entity A, a government entity, show the following amounts:
 Unadjusted Trial Balance – P2,753,000

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 Adjusted Trial Balance – P2,765,000

 Statement of Financial Position (Debit Column) – P1,880,000
 Statement of Financial Performance (Credit) – P1,137,000
How much is the surplus (deficit) for the period?
a. 252,000 c. (252,000)
b. 885,000 d. (743,000)

26. Which of the following expenditures is not shown in the statement of financial performance?
a. Personnel Services (PS)
b. Maintenance and Other Operating Expenses (MOOE)
c. Capital Outlay (CO)
d. Financial Expenses (FE)
e. All of these expenditures are shown in the statement of financial performance.

27. The entries to record the constructive remittance of taxes withheld through Tax Remittance Advice
include all of the following, except
a. A debit to the “Cash-Tax Remittance Advice” account
b. A credit to the “Cash-Tax Remittance Advice” account
c. A debit to the “Subsidy from National Government” account
d. A debit to the “Due to BIR” account
e. All of these are included.

28. The receipt of Notice of Cash Allocation is recorded in the

a. Books of accounts (Journal and Ledger)
b. Registry of Allotments and Notice of Cash Allocation (RANCA)
c. a and b
d. None of these

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

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

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

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

32. 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 PPSAS, how should the revenue from the contract be recognize?
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.

33. 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.

34. 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.

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d. any of these.

35. 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.

36. A type of fund held by a government entity that is designated for special purposes.
a. General fund c. Trust fund
b. Special fund d. Fiduciary fund

37. The national government receives a foreign grant conditioned on the construction of a public
infrastructure. According to the GAM for NGAs, when does the national government recognize
revenue from the grant (i.e., credit to the Income from Grants and Donations in Cash’ account)?
a. Upon the receipt of the grant.
b. When the grant becomes receivable, provided there is reasonable assurance that the attached
condition will be satisfied.
c. When the condition is met.
d. When the related expenses for which the grant is intended to compensate are incurred.

38. The receipt of which of the following may not give rise to revenue by a government entity?
a. Notice of Cash Allocation c. Subsidy from another government
b. Tax Remittance Advice entity
d. Inter-agency fund transfer

39. A government entity collects fees for the processing of certain permits. The processing of a permit
would normally take a few minutes. The processing fee is collected upon issuance of the permit. This
government entity would normally recognize revenue from permit fees
a. on a straight-line basis.
b. by reference to the stage of completion.
c. upon collection of the fee.
d. when the significant risks and rewards are transferred to the customer.

40. The receipt of a performance bond or a security deposit is credited to a

a. liability account c. cash account
b. revenue account d. a and c

41. Which of the following is not one of the fundamental principles for revenue under P.D. No. 1445?
a. All revenues shall be remitted to the BTr and included in the General Fund, unless another law
specifically allows otherwise.
b. Recording of revenue in other types of funds (e.g., Special Fund) shall be made only when
authorized by law.
c. Collections of revenue must be properly acknowledged through pre-numbered Official Receipts.
d. All collections of revenue must be in the form of cash. Checks are not acceptable.

42. Imposition and collection of tax revenue is considered

a. exchange transaction c. donation
b. non-exchange transaction d. any of these

43. According to the GAM for NGAs, all of the following criteria must be met before a government entity
recognizes revenue from sale of goods, except
a. Significant risks and rewards of ownership of the goods are transferred to the buyer and the
entity does not retain control over those goods.
b. It is probable that economic benefits will flow to the entity.
c. The amounts of revenue and related costs can be measured reliably.
d. The stage of completion can be measured reliably.

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44. According to the GAM for NGAs, when the outcome of a service contract cannot be estimated
reliably, revenue is recognized
a. on a straight-line basis over the periods the services are rendered.
b. by reference to the contract’s stage of completion at each reporting date.
c. only to the extent of costs that are expected to be recovered.
d. only upon the completion of the contract.

45. Entity A sells goods with a list price of P100,000, on account. Credit term is 20% and 10%. Journal
entry to recognize the revenue includes all of the following except
a. A debit to accounts receivable for P72,000.
b. A credit to sales revenue for P72,000.
c. A debit to sales discounts for P28,000.
d. All of these are included in the entry.

46. According to the GAM for NGAs, an exchange of goods or services of similar nature and value
between entities
a. gives rise to revenue measured at the fair value of the goods or services received, adjusted for
any cash paid or received on the exchange.
b. gives rise to revenue measured at the fair value of the goods or services given up, adjusted for
any cash paid or received on the exchange.
c. a or b, whichever is more clearly determinable.
d. does not give rise to revenue.

47. Gifts, donations and goods in-kind with condition are recognized
a. as revenue immediately upon the receipt thereof.
b. initially as liability and recognized as revenue only when the condition is satisfied.
c. as revenue measured at fair value only when actually received.
d. directly in equity.

48. Which of the following, according to GAM for NGAs, may never give rise to revenue for a
government entity?
a. Services in-kind c. Concessionary loan
b. Debt forgiveness d. Grant with condition

49. When an amount already recognized as revenue become subsequently uncollectible, it is

a. Recognized as expense.
b. Recognized as an adjustment to the revenue originally recognized.
c. Either a or b as an accounting policy choice.
d. Not recognized.

50. Which of the following receipts of a government entity will give rise to revenue recognition?
a. Receipt of excess cash advance
b. Receipt of refund for overpayment of expenses
c. Receipt of performance bond
d. Receipt of subsidy from the National Government or other National Government Agencies

51. A certification on the availability of allotment is required before a disbursement of government

funds is made. According to the GAM for NGAs, who shall issue this certification?
a. Budget Officer c. Head of Agency
b. Chief Accountant d. Requisitioning Individual

52. The Chief Accountant shall charge obligations incurred against available allotment to ensure that
a. the NCA is sufficient to meet the disbursement needs.
b. there are no unreleased appropriations.
c. no overdraft is incurred.
d. no excess allotment exists.

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53. A certification on the availability of funds and completeness of supporting documents is required
before a disbursement of government funds. According to GAM for NGAs, who issues certification?
a. Budget Officer c. Head of Agency
b. Chief Accountant d. Requisitioning Individual

54. Which of the following results to the recognition, in the books of accounts, of expenses classified as
Personnel Services?
a. Granting of cash advance for payroll c. Issuance of office supplies to end users
b. Liquidation of payroll fund d. Set up of payable for payroll

55. According to the GAM for NGAs, disbursements for salaries and wages shall be supported by
a. Disbursement Vouchers c. Petty Cash Vouchers
b. Payroll d. Official Receipts

56. Which of the following results to the recognition of expense?

a. Granting of cash advance for travel
b. Liquidation of cash advance for travel
c. Refund of excess cash advance
d. Remittance of the refund for excess cash advance to the BTr.

57. The entry in the books of a government agency with foreign service post to record the receipt of
disbursement authority called the Cash Disbursement Ceiling (CDC) includes a
a. debit to Cash-Modified Disbursement System (MDS)
b. credit to Subsidy from National Government
c. credit to Cash-Constructive Income Remittance
d. debit to Subsidy from National Government

58. This is used to recognized: (1) in the books of national government agencies, the constructive
remittance to BIR and BOC of taxes and customs’ duties withheld, and the constructive receipt of
NCA for those taxes and customs duties; (2) in the books of the BIR and BOC, the constructive
receipt of tax revenue and customs duties; and (3) in the books of the BTr, the constructive receipt
of the taxes and customs duties remitted.
a. Notice of Cash Allocation (NCA) c. Cash Disbursement Ceiling (CDC)
b. Tax Remittance Advice (TRA) d. Non-Cash Availment Authority (NCAA)

59. All of the following are considered valid cashless disbursements, except
a. purchase of goods using an electronic card issued by CitiBank.
b. payment of payables using a Non-Cash Availment Authority.
c. remittance of taxes withheld to the BIR through Tax Remittance Advice.
d. online payment through LBP’s eMDS.
e. payment to supplier through LBC Padala.

60. Which of the following government agencies will most likely be able to obtain a disbursement
authority in the form of Cash Disbursement Ceiling (CDC)?
a. BIR c. DFA
b. DPWH d. NFA

61. Entity A disburses a check chargeable against the Treasury Account. The journal entry to record the
disbursement involves a credit to which of the following accounts?
a. Cash-Treasury/Agency Deposit, Regular
b. Cash-Modified Disbursement System (MDS), Regular
c. Cash-in-Bank-Local Currency, Current Account
d. Cash-Collecting Officers

62. Entity A sends an employee to an official travel and gives him cash to cover his travelling expenses.
Which of the following is most likely the entry to record the cash disbursement?
a. Travelling Expenses xxx
Advances to Officers and Employees xxx

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b. Travelling Expenses xxx

Cash-Modified Disbursement System (MDS), Regular xxx
c. Advances to Officers and Employees xxx
Cash-Modified Disbursement System (MDS), Regular xxx
d. Advances to Officers and Employees xxx
Cash on Hand xxx

63. Entity A purchases office supplies from an authorized merchant using an electronic card. The entry
to record the purchase is
a. Office Supplies Inventory xxx
Accounts Payable xxx
b. Accounts Payable xxx
Cash – Modified Disbursement System (MDS), Regular xxx
c. Office Supplies Inventory xxx
Cash-Modified Disbursement System (MDS), Regular xxx
d. No journal entry.

64. Entity A wants to make disbursements online. Which of the following should Entity A do so that it
can make valid disbursements online?
a. Apply for a PayPal account.
b. Obtain a debit card or credit card that is either Visa or MasterCard from any bank.
c. Enrol with the eMDS of the Land Bank of the Philippines.
d. Make a facebook account.

65. Entity A acquires the equipment on account and settles the account through Non-Cash Availment
Authority (NCAA). The entry to settle the account is
a. Accounts Payable xxx
Subsidy form National Government xxx
b. Accounts Payable xxx
Cash – Modified Disbursement System (MDS), Regular xxx
c. Accounts Payable xxx
Cash-Constructive Income Remittance xxx
d. No journal entry.

66. Entity A has a foreign service post. During the period, Entity A receives authorization from the DBM
allowing it to use the collections of its own foreign service post to defray for the necessary expenses
of the foreign service post. The entry to record the disbursement authority is
a. Cash in Bank-Foreign Currency, Current Account xxx
Cash-Collecting Officer xxx
b. Cash-Constructive Income Remittance xxx
Subsidy from NG xxx
c. Accounts Payable xxx
Cash-Constructive Income Remittance xxx
d. No journal entry.

67. Which of the following modes of disbursements is most similar to a check disbursement?
a. eMDS c. ADA
b. NCAA d. NBA

68. A government entity makes payment through Advice to Debit Account (ADA). The entry most likely
to be used in recording the payment is
a. Accounts Payable xxx
Cash – Modified Disbursement System (MDS), Regular xxx
b. Accounts Payable xxx
Subsidy from National Government xxx
c. Accounts Payable xxx
Cash-ADA xxx
d. None. The transaction is recorded only in the Registries and ORS.

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69. A government entity makes constructive remittance of taxes withheld to the BIR through Tax
Remittance Advice (TRA). The entry used in recording the transaction is
a. Cash-Tax Remittance Advice xxx
Subsidy form National Government xxx
b. Due to BIR xxx
Cash-Tax Remittance Advice xxx
c. a and b
d. None. The transaction is recorded only in the Registries and ORS.

70. Which of the following modes of disbursements would result to the recognition of a loan payable in
the books of the BTr?
a. CDC c. ADA
b. NCAA d. UFC

71. Which of the following is not used in processing disbursements?

a. DVs c. PCVs
b. Payroll d. ORs

72. Which of the following is not a form of disbursement authority?

a. NCA c. NTA
b. TRA d. Allotment

73. It is an authority issued by the DBM to central, regional and provincial offices and operating units to
cover their cash requirements. It specifies the maximum amount of cash that can be withdrawn
from a government servicing bank in a certain period.
a. Notice of Cash Allocation (NCA) c. Cash Disbursement Ceiling (CDC)
b. Tax Remittance Advice (TRA) d. Non-Cash Availment Authority (NCAA)

74. Entity A has a foreign service post. During the period, Entity A receives authorization from the DBM
allowing it to use the collections of its own foreign service post to defray for the necessary expenses
of the foreign service post. This authorization is called
a. Cash Disbursement Ceiling (CDC)
b. Non-Cash Availment Authority (NCAA)
c. Electronic Modified Disbursement System (eMDS)
d. Advice to Debit Account (ADA)

75. Entity A disburses a check chargeable against its checking account maintained with Government
Servicing Bank. The journal entry to record the disbursement involves a credit to which of the
following accounts?
a. Cash-Treasury/Agency Deposit, Regular
b. Cash-Modified Disbursement System (MDS), Regular
c. Cash-in-Bank-Local Currency, Current Account
d. Cash-Collecting Officers

76. Which of the following entries would most likely constitute a cash disbursement, rather than a check
disbursement?
a. Electricity Expenses xxx
Cash-Modified Disbursement System (MDS), Regular xxx
To record payment for electricity expenses
b. Accounts Payable xxx
Cash-Modified Disbursement System (MDS), Regular xxx
To record payment of accounts payable
c. Advances to Officers and Employees xxx
Cash-Modified Disbursement System (MDS), Regular xxx
To record grant of cash advance for travel
d. None. All of these are check disbursements.

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77. Which of the following would most likely constitute a disbursement through Advice to Debit
Account (ADA)?
a. Electricity Expenses xxx
Cash-Modified Disbursement System (MDS), Regular xxx
To record payment for electricity expenses
b. Accounts Payable xxx
Cash-Modified Disbursement System (MDS), Regular xxx
To record payment of accounts payable
c. Advances to Officers and Employees xxx
Cash-Modified Disbursement System (MDS), Regular xxx
To record grant of cash advance for travel
d. None. All of these are check disbursements.

78. Which of the following is true regarding disbursements through electronic Modified Disbursement
System (eMDS)?
a. The disbursement is not recorded in the books of accounts.
b. The disbursement is made through the issuance of MDS check.
c. The disbursement is made through the use of a credit card that is swiped in a card swipe
machine of an authorized merchant.
d. The disbursement is made through an online transaction.

79. Entity A purchases office supplies from an authorized merchant using an electronic card. The entry
to record the purchase is
a. Office Supplies Inventory xxx
Accounts Payable xxx
b. Accounts Payable xxx
Cash – Modified Disbursement System (MDS), Regular xxx
c. Office Supplies Inventory xxx
Cash-Modified Disbursement System (MDS), Regular xxx
d. No journal entry.

80. Entity A acquires the equipment on account and settles the account by debiting Accounts Payable
and crediting Subsidy from National Government. The mode of disbursement used by Entity A is
most likely a(an)
a. Credit Card transaction c. Cash Disbursement Ceiling
b. Advice to Debit Account d. Non-Cash Availment Authority

81. Which of the following is not considered a financial asset?

a. Petty cash fund c. Accounts receivable
b. Investment in debt securities d. Prepaid assets

82. A cash shortage of a government entity is most likely recorded as a

a. debit to a receivable account c. credit to miscellaneous income account
b. debit to cash shortage or overage d. credit to cash shortage or overage

83. Dishonored checks are recorded by a government entity as

a. Notes receivable c. Accounts receivable
b. Other receivables d. Losses

84. The entry to record the replenishment of a petty cash fund of a government entity is
a. Expense accounts xxx
Cash-Modified Disbursement System (MDS), Regular xxx
b. Expense accounts xxx
Petty Cash xxx
c. Expense accounts xxx
Cash-Collecting Officers xxx
d. Expense accounts xxx
Cash-Treasury/Agency Deposit, Regular xxx

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85. Under this method of bank reconciliation statement preparation, the unadjusted book and bank
balances are brought to an adjusted balance that is reported on the statement of financial position.
a. Bank to Book Method c. Adjusted Balance Method
b. Book to Bank Method d. All of these

86. Which of the following may be paid through the petty cash fund of a government entity?
a. Rent worth P12,000. c. Office supplies worth P20,000.
b. Pantry supplies worth P15,000. d. None of these.

87. Entity A maintains a petty cash fund. At any given point of time, the cash on hand and the petty cash
vouchers must be equal to the ledger balance of the petty cash fund. If these are not equal, the
difference is either shortage or overage. This system of handling petty cash fund is called
a. Impress System c. Pretty Cash System
b. Fluctuating Balance System d. Imprest System

88. According to the GAM for NGAs, the establishment of a petty cash fund
a. requires the approval of the Head of Agency.
b. requires the approval of the Chief Accountant.
c. requires the approval of the President of the Philippines.
d. does not require any formal approval because petty cash funds are likely to be immaterial.

89. The “Loans Receivable” account is most likely to be used in the books of accounts of which the
following government agencies?
a. COA c. BTr
b. NIA d. All of these

90. Which of the following is not one of the characteristics of a derivative?

a. It requires no notional amount (or only a very minimal notional amount).
b. Its value changes in response to the change in an underlying.
c. It requires no initial net investment (or only a very minimal initial net investment).
d. It is settled at a future date.

91. According to the GAM for NGAs, these refer to incremental costs that are directly attributable to the
acquisition, issue, or disposal of a financial instrument.
a. Costs to sell c. Financial costs
b. Transaction costs d. Variable costs

92. Which of the following is not one of the categories of financial assets under the GAM for NGAs?
a. Held-to-maturity investments
b. Loans and receivables
c. Available-for-sale financial assets
d. Financial asset through other comprehensive income

93. Entity A acquires an investment for P1,000,000. Transaction costs amount to P10,000. At year-end,
the investment has a fair value of P900,000. If the investment is classified as financial asset through
surplus or deficit, how much is the loss from the change in fair value?
a. 100,000 c. 110,000
b. 90,000 d. 0

Use the following information for the next four questions

On January 1, 20x1, Entity A acquires 10-year, 10%, P2,000,000 face amount bonds for P1,456,792 and
classifies them as held-to-maturity investments. Transaction costs on the acquisition amount to
P125,919. The issuer pays annual interest every December 31. The effective interest rate is 14%.

94. The initial carrying amount of the investment on January 1, 20x1 is

a. 1,456,792 b. 1,330,873

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c. 1,582,711 d. 2,000,000

95. The interest income in 20x1 is

a. 221,580 c. 186,322
b. 203,951 d. 200,000

96. If the investment is classified as available for sale financial asset and the fair value at yearend is
P1,800,000, how much is the gain (loss) from the change in fair value?
a. (200,000) c. 195,709
b. (217,289) d. 238,869

Date Collections Interest Income Amortization Present value

1/1/x1 1,582,711
12/31/x1 200,000 221,580 21,580 1,604,291

97. If the investment is classified as available for sale, how much is the interest income in 20x1?
a. 221,580 c. 186,322
b. 203,951 d. 200,000

98. According to the GAM for NGAs, changes in fair value of investments classified as available for sale
financial assets are
a. recognized in surplus or deficit c. not recognized
b. recognized in net assets d. a or b

99. Entity A acquires an investment for P100,000 and incurs transaction costs of P10,000. At year-end,
the fair value of the investment is P80,000. Entity A recognizes a P30,000 loss from the change in fair
value. The investment would most likely to have been classified under which of the following
categories of financial assets?
a. Available-for-sale financial assets c. Held-to-maturity investments
b. Financial asset through surplus or d. Loans and receivables
deficit

100. Entity A acquires an investment for P100,000 and incurs transaction costs of P10,000. At year-
end, the fair value of the investment is P120,000. However, the investment is appropriately reported
in the year-end statement of financial position at a carrying amount of P106,382. The investment
would most likely to have been classified under which of the following categories of financial assets?
a. Available-for-sale financial assets c. Loans and receivables
b. Held-to-maturity investments d. Insufficient information

101. According to the GAM for NGAs, a government entity’s cash comprises all of the following
except
a. cash on hand c. cash equivalents
b. cash in bank d. cash treasury accounts

102. Which of the following is excluded from the amount of cash that is reported in the statement of
financial position of a government entity?
a. unreleased checks drawn c. undeposited collections
b. cancelled checks drawn d. post-dated checks received

103. An unexplained cash overage of a government entity is recorded as a

a. credit to a payable account c. credit to miscellaneous income account
b. debit to a cash shortage overage d. credit to a cash shortage or overage
account

104. All of the following are considered internal controls over cash except
a. Requiring a cash custodian to be properly bonded. The amount of bond shall not be less than
the cash accountability of the custodian.
b. Preparing a bank reconciliation for each bank account maintained by a government entity.

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c. Making estimates of recurring expenses before establishing an amount for a petty cash fund.
d. Maintaining the petty cash fund under a Fluctuating Balance System wherein the total cash on
hand and petty cash vouchers may or may not be equal to a fixed amount of petty cash fund at
any given point of time.
e. Requiring at least three bidders or canvases before making purchases.

105. The per transaction threshold for petty cash disbursements of a government entity is
a. P5,000 c. P15,000
b. P10,000 d. No limit; sky is the limit.

106. A government agency shall prepare a bank reconciliation for each bank account maintained.
Bank reconciliations are prepared using the
a. Bank to Book Method c. Adjusted Balance Method
b. Book to Bank Method d. Any of these

107. If the adjusted balance of cash is less than the unadjusted balance per books and there are no
other reconciling items or errors, the difference is most likely caused by
a. Credit memo c. Deposits in transit
b. Debit memo d. Outstanding checks

108. According to the GAM for NGAs, receivables are measured at

Initial Subsequent
a. Fair value Amortized cost
b. Fair value plus transaction costs Amortized cost
c. Fair value minus transaction costs Amortized cost
d. Fair value Fair value

109. The subsequent changes in the fair value of an investment that is classified as available for sale
are recognized in
a. surplus or deficit c. not recognized
b. net assets or equity d. any of these as an accounting policy

110. According to the GAM for NGAs, the very purpose of derivatives is
a. risk management c. risk incurrence
b. speculation d. a or b

111. Entity A, a government entity, purchases inventories. To record a purchase, Entity A would likely
debit the (an).
a. Inventory account c. Expense Account
b. Purchases Account d. a or b

112. Entity A, a government hospital, acquires medicines to be sold in its pharmacy. Entity A would
record the medicines acquired as
a. Semi-Expendable Property c. Inventory Held for Distribution
b. Inventory Held for Consumption d. Inventory Held for Sale

113. Entity A, a government entity, purchases relief goods which are to be held on standby, ready to
be distributed when a calamity strikes. Entity A would most likely classify the goods purchased as
a. Inventory Held for Consumption c. Purchases
b. Inventory Held for Distribution d. Only a note disclosure shall be made

114. According to the GAM for NGAs, this shall be used for large numbers of items of inventory that
are ordinarily interchangeable.
a. Specific identification
b. FIFO
c. Weighted average cost applied in a period inventory system
d. Weighted average cost applied in a perpetual inventory system
e. Any of these as a matter of accounting policy choice

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115. This refers to the cost an entity would incur to acquire an asset on the reporting date.
a. Net realizable value c. Current replacement cost
b. Fair value d. Present value

116. Which of the following inventories of a government entity would be subsequently measured at
the lower of cost and current replacement cost?
a. Inventories of rice that are held for sale
b. Medicines being sold by a government-owned pharmacy
c. Books to be distributed to students in public schools
d. Forest products held for sale

117. Which of the following events or transactions would not lead to the recognition of the cost of
inventory as expense?
a. The inventory is written down.
b. The inventory is distributed for free.
c. The inventory is exchanged for dissimilar inventory.
d. The inventory is consumed in the manufacturing process.

118. The accounting division of a government entity uses this record and monitor the movements
and balances inventories.
a. Stock Card c. Journal Entry
b. Stock Ledger Card d. Special Journal

119. Which statement correctly differentiates the Stock Card from the Stock Ledger Card?
a. The Stock Ledger Card is maintained by the Budget Division while the Stock Card is maintained
by the Accounting Division.
b. The Stock Card is subject to audit by the COA while the Stock Ledger Card is not.
c. The Stock Card shows quantities only while the Stock Ledger Card shows monetary balances
only.
d. The stock Card shows quantities only while the Stock Ledger Card shows quantities as well as
monetary amounts.

120. This document is prepared when end users request for the issuance of inventories that are
available on stock.
a. Purchase Requisition Form c. Purchase Order
b. Custodian Inventory Slip d. Requisition and Issue Slip

121. Entity A, a government entity, purchases inventory to be held for sale in the ordinary course of
activities. Which of the following is the correct entry, to record the purchase?
a. Merchandise Inventory xxx
Account Payable xxx
b. Purchase xxx
Accounts Payable xxx
c. a or b depending on the accounting policy being used
d. none, a government entity cannot hold inventories for sale; only for consumption.

122. Entity A, a government entity, distributed welfare goods to the intended recipients. The entry to
recognize the event is
a. Cost of Sales xxx
Welfare Goods for Distribution xxx
b. Welfare Goods Expense xxx
Welfare Goods for Distribution xxx
c. Distribution costs xxx
Welfare Goods for Distribution xxx
d. None. The expense is recognized at the end of the period when a physical count is performed.
The expense is closed to the Income Summary account.

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123. At year-end, Entity A, a government entity, determines the following information:

 Carrying amount of goods held for distribution — P100,000.
 Net realizable value — P80,000.
 Current replacement cost — P90,000.
How much of the carrying amount of the inventory is recognized as expense?
a. 10,000 c. 90,000
b. 20,000 d. None of these

Use the following information for the next two questions:

Entity A, a government entity, determines the following information regarding the inventory of Goods A,
a non-unique item:

Units Unit Cost Total Cost

Balance at January 1, 20x1 3,000 P 19.55 P 58,650
Purchases:
January 6, 20x1 10,200 21.50 219,300
January 26, 20x1 2,250 20.60 46,350
Sales:
January 7, 20x1 2,700
January 31, 20x1 7,200

124. How much is ending inventory?

a. 116,382 c. 116,495
b. 117,300 d. Any of these.

125. How much is the cost of sale?

a. 207,805 c. 207,000
b. 207,918 d. Any of these.

126. Entity A, a government entity, purchases furniture and fixtures amounting to P14,000. Entity A
would most likely record the purchase as
a. Property, Plant and Equipment c. Inventory Held for Manufacturing
b. Inventory Held for Consumption d. Semi-Expendable Property

127. Accountable forms such as pre-printed forms used in government transactions are most likely to
be classified by a government entity as
a. Inventory Held for Consumption
b. Inventory Held for Sale
c. Semi-Expendable Property
d. Not considered inventory, according to the GAM for NGAs

128. Inventories are initially measured at cost and subsequently measured at

a. The Lower of Cost and Net realizable value for good s held for sale
b. The Lower of Cost and Current replacement cost for goods held for distribution.
c. a and b
d. cost

129. Which of the following cost formulas is not available for use by government entities?
a. Specific identification c. Weighted Average
b. FIFO d. All of these are available

130. The GAM for NGAs requires the use of which of the following inventory systems?
a. Perpetual inventory system c. a or b
b. Periodic inventory system d. none of these

131. Government entities record purchases of inventories

a. in an inventory account b. in the Purchases account

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c. a or b d. as expenses

132. Which of the following may be included as cost of inventory?

a. freight-in under a freight collect, FOB destination sale term
b. trade discounts
c. cost of insurance while the goods are in transit
d. advertisement cost that resulted to the resale of inventory purchased

133. Arrange the following in the sequence they are used in the requisition and receipt of inventories
by a government entity
I. Inspection and Acceptance Report (IAR)
II. Disbursement Voucher (DV)
III. Purchase Request (PR)
IV. Journal entry
V. Purchase Order (PO)
VI. Stock Card (SC)
a. III, V, I, VI, IV and II
b. III, V, I, IV, VI and II
c. III, V, I, II, VI and IV
d. V, III, I, II, VI and IV

134. This is maintained in the Property/Supply Division to record the movements of inventories.
a. Stock Card (SC) c. Supplies Ledger Card (SLC)
b. Property/Supply Card (PSC) d. Magic Card (MC)

135. This is used to report wasted materials, such as destroyed spare parts and other spoilages.
a. Wasted Stocks Card (WSC) c. Report on Physical Count of Inventories
b. Waste Materials Report (WMR) d. Inventory Custodian Slip

Reviewed and Checked by:

Dr. Genoveva Y. Reyes, CPA, FRIAcc

Dean, College of Business Education

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