bal al GOVERNMENT ACCOUNTING & Accounting for Non-Profit Organizations BASED ON GOVERNMENT ACCOUNTING MANUAL FOR NATIONAL GOVERNMENT AGENCIES (GAM for NGAs) and PHILIPPINE FINANCIAL REPORTING STANDARDS (PFRSs) oui on FEES). weionstorenostcean16 Chapter 1 Summary: ‘Aside from providing informatio demonstrate thé entrusted to it. The following are charged with government accounting responsibility: COA, DBM, BTr and other government agencies, The GAM for NGAs pr be applied in the financial reporting was promulgated by the COA primarily to harmonize the {des the principles and procedures to government entities. It government accounting standards _ with _ international standards. Basic principles: Compliance with PPSAS and other aws, Accrual basis, Budget basis, Revised chart of accounts, Double, entry, Financial statements based on accounting and budgetary records, and Fund cluster acco ual chara Understandabil Materiality, Timeliness, Faithfu Substance over fo Prudence, Completeness, and Comparabil ‘An item is recognized as asset if all of the fo are met: eristics: wing criteri the item meets the definition of an asset; 2. probable inflow of future economic benefits; and 3, reliable measurement of cost or other value (e.g, fair PROBLEMS: PROBLEM 1-1: TRUE OR FALSE 1. Compared to 1g for business ent s, government ing places greater emphasis on the sources and of government overnment resources. funds and the management's stewardship over Taxes are the main source of fund 1e government. Other sources f funds of the government include fees, ements and and grants from other go Currently, report based on NGAS. f ig of government entities is The p entities are very hat milar to tho: inciples used in the financial report ig of government y a very few of these that are applied to business prine The principles in the GAM principles in the PFRSs. 1 NGAs are similar to the The GAM inder autho Constitution. A unique financial report ies is the use of fund r NGAs is promulgated primarily to harmonize US. GAAP.19 10. An item is recognized as set if it meets bi benefits” and “reliable me ia, regardless of whether the item is a resource arising from past eve al funds and managing and s thereof. rojects of the government. future econo NGAs, the basis of accounting to be PROBLEM 1-2: MULTIPLE CHOICE 1, Which of the following is a unique requirement of governm accounting that is not required in the accour © Modified accrual basis d. Any of these as a policy choice jurces ized and i t0 PD. No, renting this policy? of a. The use of double-entry recording sy b. The use of single-entry recording system. ¢. The use of accrual basis of accounting, > The presentation of budget in statements. Ww. Accord prmation in the financial 2. What is the legal basis of the COA in promulgating the GAM for NGAs? ; @._P.D. No. 1445, State Audit BL The Philippine Con: ©. R.A. 9298, The Philippine Accountancy Act of 2004 d.” Philippine Public Sector Accounting Standards (PPSAS) Which of the following is tasked keeping the general accounts of the government, supporting vouchers, and other documents? a)COA ©. NGAs ian) to b. DBM d. Congress of a car as a birthday gift for having her 18" birthd: next 4. The Bureau of Treasury (BTR) is responsible for a. promulgating accounting and auditing rules and regulations b. the formulation and implementation of the national budget with the goal of attaining the nation’s. soci economic obd._ Mr. A shall release the fund but requires Mr. B to p! in writing, that the car shall be returned to the gove is daughter's birthday: overnment employee entrusted with the custody of government funds, has lost the government funds entrusted 10 him in a force majeure. What should Mr. C do to felieve him from liability? a. Mr. C should immediately notify the Head of Agency after 30 days. 'p, /Mr. C should immediately notify the COA within 30 days. © Mr. C should immediately notify the Bureau of Treasury within 30 days. Mr. C should keep the event a secret and funds to arrive. ‘These refer to the attributes that make information useful to a. Usefulness characteristics b. Quantitative characteristics €. Qualitative characteristics 4. Fundamental principl Information los reported on a timely basis, 4) Relevance b. Reliability c. Neutral d. Materiality . Which of the following qualitative characteristics does an entity most likely would need to make some trade-offs? a. Faithful representation and Substance over form Materiality and Relevance Relevance and Reliability Understandability and Comparability y Te a property. Which of the re ch stic being applied by nce over form, f the following is not one of the fund clusters of a yment entity? r Agency Fund n Assisted Projects Fund ‘ash Fund eve a proper balance between relevance and werriding consideration is w users’ needs are best satisfied ce is always more important than reliability ty is always more important than relevance ter weight shall be given to relevance compared to PROBLEM 1-3: FOR CLASSROOM DISCUSSION differ from the accounting ernment accounting places more emphasis on profit- making, Government accounting is very complex that only highly tual individuals can understand it Government accounting places greater emphasis on sources and utilization of funds in accordance with the law and management's stewardship over government resources entrusted to the ent2 Chapter 1 4. Government accounting is specialized in nature that the Which of the following is not principles applicable to business ies. are_never for NGAS? apt ‘a. to harmonize government accounting. standards nternational standards, 2. Which of the following is not a source of revenue for b. to update the coding structure and accounts government? cto update accounting books, registries, records, forms, a. Taxes reports and b. Fees collected by government agencies to update’ government accounting standards to be c. Grants and donations from other governments consistent with the provisions of U.S. GAAP. .)Contract price on government contracts awarded to private companies. All of the following are requirements peculiar to a government entity. Which is not? 3. Entity A (a government agency) is entrusted with government a. Presenting budget inform: ancial statements. resources. According to P.D. 1445, who is directly responsible b for the efficient and ef resources? © “Incorporating budgetary controls in the financial reporting a. The government emp! istody over system. resources. Accrual basis of accounting. b.) The Head of Entity A. © The COA staff stationed in Entity A 8. Which of the following qualitative characteristics is improved d. The Foot of Entity A. when information is reported on a timely basis? Relevance c. Understandability 4. Which of the following is not charged w ment aan accounting responsibility under the GAM for NGAs? a.COA c.NGAs 9. The best estimate for a loss is 100,000. However, the entity b. DBM 4. House of Representatives deliberately overstated the loss to P200,000. Which of the following qualitative characteristics is violated? 5. The Department of Budget and Management (DBM) is Si Patence! eae b. Reliability d. Nothing is violated a. promulgating accounting and auditing rules regulations. Which of the following, financial statements is pec ‘by Yhe formulation and implementation of the national government entity? budget with the goal of a ‘economic objectives. ing, the nation’s socio- Balance Sheet Statement of Cash Flows nds and manay Statement of Comparison of Budget and Actual Amounts ere. : of CHanges in Equity 1¢ projects of the government. c. receiving and keeping national controlling the disbursements d. directly implementing44 PROBLEMS: PROBLEM 2-1: TRUE OR FALSE 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. 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. After the budget call from the DBM, the proposed budget of. various agencies are submitted immediately to the Office of the President for review. An entity can incur obligations after receiving notice of its appropriation but before receiving the allotment. Budget deliberations in the Congress start in the House of Senate A government entity must first receive an allotment before it can incur obligations. A government entity can make disbursements even before it receives a disbursement authority. Appropriation is also called obligational authority. 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 45 Responsi 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. accounting PROBLEM 2-2: MULTIPLE CHOICE Which of the following does not properly describe the budget process used in the Philippines? a. Bottom-up budgeting b. Top-down budgeting <. Zero-based budgeting d.) Non-incremental budgeting, Arrange the following steps according to the sequence that they appear in the budget cycle. llotment Bicameral deliberations Budget accountability reports President's enactment of the GAA. Budget hearings with the DBM V, IV, I Land IL V, IL IV, Land I cI, V, IL Land Hil 4. V, LL 1V and It 3. Arrarge the following steps according to the sequence that they appear in the budget cycle. Allotment Disbursement authority Disbursement Appropriation Incurrence of obligationChapier2 a. IV, 1,0, Vand It CIV, I, V, Hand IIL b. IV,LV, land It d.1V, V, Land Il This type of budget is prepared in such a way that estimated revenues exceed estimated expenditures. a, ) Balanced budget c. Obligations budget B.. Excess budget d. Budget meal This summarizes an agency's fiscal year plans and performance targets. It shows the agency’s physical and financial plan, monthly cash program, estimate of monthly: income, and list of obligations that are not yet due and demandable. a. Budget Execution Documents (BEDs) be Special Allotment Release Order © Statement of Approved Budget, __Utilizations, Disbursements and Balances d. Aging of Due and Demandable Obligations It is an authorization issued by the DBM to NGAs to incur obligations. Itis also referred.to as Obligational Authority. Appropriation ©. Budget call d. Budget hearings It refers to the amount contracted by a duly authorized administrative officer for which the government is held a. Appropriation Obligation b. Allotment 4, Disbursement Which of the following best describes the Notice of Cash Allocation (NCA)? a. It is a form of legislative authorization in the allocation of funds for specified purposes. b. It isa form of authorization to a government agency to incur obligations on behalf of the government. It is a form of authorization to a government agency to make disbursements out of government funds. et Process a7 d. It is a notice received from the Congress that cash is located for the payment of planned expenditures. 9. Disbursements by government entities are most commonly made through a,” MDS Checks Petty Cash Fund b. Cash Credit Card Responsibility accounting requires all of the following except a.) separate books of accounts to segregate controllable and non-controllable costs b, identification of responsibil © distinction between controllable and non-controllable costs d. coding structure for responsi PROBLEM 2. Fact pattern: A legislation approves the allocation of ®100B funds to support \¢ operations of Entity A (a government agency) in the current year. At the start of first quarter, Entity A receives authorization to cur obligations for a maximum amount of P45B in that quarter. ntity A extends half of that authorization to its lower operating units. During the quarter, Entity A receives monthly authorization disburse funds not to exceed P15B per month. Entity A extends half af those monthly authorizations to its lower operating units. At the end of the quarter, total obligations incurred amounted to P40B while total disbursements amounted to ®35B. MULTIPLE CHOICE 1. The allocation of the #100B funds to Entity A is referred to as a, Allotment by /Appropriation ‘The allocation of the P100B funds to Entity A is authorized by a. Department of Budget and Management (DBM)Chapter 2 b. Commission on Audit (COA) ©. Bureau of Treasury (BTr) d. Congress The P45B authorization is referred to as a, Allotment c. Obligation b. Appropriation d. Sub-allotment The P45B authorization is received by Entity A from a,/ DBM © BIr b. COA d. Congress The half of the P45B authorization extended by Entity A (Central Office) to its lower operating units is referred to as a. Allotment ©, Obligation b. Appropriation 4. Sub-allotment Which of the following best describes the P15B monthly authorizations? a. Allotment b._ Obligation authority (e.g. Notice of Cash Allocation ‘NCA’) ©. Disbursement authority (e.g, Notice of Cash Allocation NCA’) 4d. Disbursement authority (e.g., Notice of Transfer of Allocation ‘NTA’) The P15B monthly authorizations are received by Entity A from a.) DBM c.BTr b. COA d. Congress The half of the 158 monthly authorizations extended by | Entity A (Central Office) to its lower operating units is referred to as a. Cash Disbursement Ceiling b. Non-Cash Availment Authority Notice of Cash Allocation (NCA) 49 4d. Notice of Transfer of Allocation (NTA) Appro es, how much is shown as “unreleased appr a. P65B b. P60B d. P45B ss, how much .PI5B App s, how much ©. PLOB aPisB PROBLEM 2-4: FOR CLASSROOM DISCUSSION All disbursements of government entities must be in b, COA audit findings oming year from n the budget irrespective of uded in the previous budget. This An entity prepares its budg scratch. It scrutinizes each whether the item .was proc d a. zero budgeting b. incremental budgs ¢. scratch budgeting d. zero-based budgeting Under this approach to budgeting, several parties participate in the budget preparation - from the lowest levels of government to the highest and sometimes even citizen stakeholders participate in the budget preparation.Chapter? a. bottoms-up budgeting b. zero-based budgeting «. top-down budgeting d. bottom-up budgeting What is the correct sequence of the following steps in the budget process? L Budget Legislation Il, Budget Accountability Ill, Budget Preparation IV. Budget Execution a, ILL land IV « b. I,11V andi 101, 1V, land It 5. After deliberations in both’ houses in the Congress are finished, a committee is formed to harmonize any conflicts between the Representatives and Senate versions of the General Appropriations Bill. This committee is called the ‘Adjudication Conference Committee Bicaramel Conference Committee b, c. Referee Conference Committee @, Bicameral Conference Committee It is the authorization made by a legislative body to all funds for purposes specified by the legislative or similar authority. a) Appropriation 6, Allotment . Obligation 4. Disbursement These are the authorizations programmed annually or for some other period prescribed by law, by virtue of outstanding legislation which does not require periodic action by Congress, ‘a) Automatic Appropri b. New General Appropriations ¢. Continuing Appropriations . Supplemental Appropriations 8, Entity A, a gover Arrange the fol Entity A can make Allotment Disbursement Authority Appropriation Incurrence of obligation events in the correct sequence before id disbursements. , and IV IV, and Il | and I This is necessary before government entities can enter into contracts that bind the government for the eventu disbursement of government funds a. "Disbursement auth c. Allotment b. Notice of cash d. Incurrence of obligation’ Under responsibility aé€ounting, a manager's performance is evaluated based on all resources under his custody b<) only in terms of the costs, or other variables, that he controls. on the basis of both costs. rollable and non-controllable y at year-end.100 PROBLEMS PROBLEM 3-1: TRUE OR FALSE. ;, only the Journals and Ledgers are onsidered) accounting records; the Registries are budget records. Separate accounting records and budget registries are maintained for each fund cluster. Government entities and business entities use the term “obligation” or the phrase “incurrence of obligation” similarly. |. 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. ‘ (A check disbursement-is normally recorded as a credit to the “Cash-Modit Disbursement System (MDS), Regular” account. * : 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. At the end of each year, an adjustment is made to revert any unused NCA of a government entity. ‘The GAM for NGAs requires the Collecting Officer to issue an official receipt to acknowledge the receipt of the Notice of Cash Allocation. The entry to record the reversion of unused NCA at the end of the period is the exact opposite of the entry used to record the receipt of NCA. Process 10, The remittance of amounts withheld to the other government agencies, such as the BIR, BOC, GSIS, PhilHealth, and Pag: IBIG, is done through the TRA. PROBLEM 3-2: MULTIPLE CHOICE 1. ‘The various registries maintained by government entities are c. General Ledgers ‘b) Budget records d, Log books Which of the following is recorded in-the Obligation Request and Status (ORS)? a. Receipt of notice of approp: b. Receipt of allotment from the DBM c.. Receipt of Notice of Cash Allocation from the DBM 4) Entering into employment contracts with employees This type of expenditure pertains to all types of employee benefits. ‘a. Personnel Services (PS) b. Maintenance and Other Operating Expenses (MOOE) c. Financial Expenses (FE) 4. Capital Outlays (CO) Entity A, a government entity, made disbursements for the travelling expenses of its personnel. These expenditures are most likely classified as ‘a. Personnel Services (PS) b. Maintenance and Other Operating Expenses (MOOE) ¢. Financial Expenses (FE) d. Capital Outlays (CO) Which of the following is charged with the responsibility of Keeping the general accounts, and related documents, of the Government?102 Chapter 3 a.) COA .NGAs . BIr d. DBM PROBLEM 3-3: MULTIPLE CHOICE ‘The receipt of an allotment is recorded by a government entity inthe i a. RAOD © RAPAL b. ORS Ga andc 6. A joumal entry with a credit to the “Cash-Modified Disbursement System (MDS), Regular” account will most likely be recorded in the a. General Journal @ Cash Disbursements Journal b. Special Journal . Check Disbursements Journal 2. The incurrence of an obligation for future delivery or performance by: the o gee is recorded by a government Which of the following accounts is debited when a lections to the National c RAPAL d.aandb government entity remits its c Treasury? a. Cash-Tax Remittance Advice Cash-Modified Disbursement System (MDS), Regular Cash-Treasury/Agency Deposit, Regular Cash ~ Collecting Officers The receipt of an appropriation is recorded by a government s ) RAPAL b. ORS daandb 8 Which of the following accounts is credited when a government entity remits taxes withheld to the BIR? a.) Cash-Tax Remittance Advi b. Cash-Modified Disbursement System (MDS), Regular c. Cash-Treasury/Agency Deposit, Regular d. Cash — Collecting Officers 4. The entry to record the receipt of Notice of Cash Allocatio (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 from National Government Cash-Collecting Officer; (Credit) Subsidy from National Government i 4. No journal entry. The event is recorded only in the Registries 9, Which of the following accounts is credited when al government entity remits contributions to the GSIS) PhilHealth and Pag-IBIG? a, Cash-Tax Remittance Advice ’b, Cash-Modified Disbursement System (MDS), Regular . Cash-Treasury/Agency Deposit, Regular 4. Cash — Collecting OF According to the Revised Chart of Accounts (RCA) issued by the COA, the “Subsidy from National Government” account is 10. Obligations recorded in the registries but not yet in the a(an) accounting books are referred to as a. Asset account Revenue account a.’ Not Yet Due and Demandable b. Liability account d. Equity account b. Contingent liabilities ¢. Erroneous recording d. Unpaid obligations Which of the following is not one of the necessary closing entries of a government entity? ‘108 Closing of the “Cash-Treasury/Agency Deposit, Regular” account to the “Accumulated Surplus/(Deficit)” account. Closing of the “Subsidy from National Government” account to the “Revenue and Expense Summary” account. Closing of income and expense accounts to the “Revenue and Expense Summary” account. Closing of the net balance of “Revenue and Expense Summary” account to the "Subsidy from National Government” account. A government entity pays an accounts payable. The entry to record the payment will most likely include a a. debit to the “Cash-Modified Disbursement System (MDS), Regular” account. b. credit to the “Due to BIR” account. ©, credit to the “Cash-Treasury/Agency Deposit, Regular” account. d/ None of these. The event is recorded only in the Registries and the Obligation Request and Status, In accordance with the GAM for NGAs and the Revised Chart of Accounts, how does a government entity recognize the uncollectability of accounts receivable? By debiting the “Bad Debts Expense” account. By debiting the “Impairment Loss-Loans and Receivables" account. ©. By debiting the “Allowance for Impairment-Accounts Receivab) d. bande The “Subsidy from Nat when recording a a. receipt of NCA b, reversion of unused NCA. © constructive remittance of customs duties or taxes withheld through TRA nal Government” account is credited Chapter3, PROBLEM 3-4: MULTIPLE CHOICE Government A Process 4. aandc Expenditures to acquire classified as a. Personnel Services (PS) b, Maintenance and Other Operating Expenses (MOOE) long-term assets are most likely 4. This is used to recognize the const tance of taxes hheld to the BIR or customs duties withheld to the BOC. a:) Tax Remittance Advice (TRA) b. Notice of Tax Allocation (NTA) ¢. Tax and Customs Remittance Advice (TCRA) d. Notice of Tax Remittance Advisory (NTRA) 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. losing of the “Cash-Treasury/Agency Deposit, Regular” cour d. adjustment of the “Cash-Modified Disbursement System (MDS), Regular” account for the unused Notice of Cash Allocation. All of these affect surplus or defi Entity A received Notice of Cash Allocation (NCA) amout to 625,000 for the year. Unused NCA at the end of the period amounted to 6,000. Entity A remitted taxes withheld to the BIR amounting to 48,000 through Tax Remittance Advice (TRA). How much is:the “Net ial Assistance/Subsidy” to be reported in Entity A’s statement of financial performance?106 ‘@) 667,000 571,000 619,000 4.0 4. Entity A, a government entity, had the following transactions during the period: + Received Notice of Cash Allocation (NCA) amounting to 750,000. © Earned total revenue of 290,000. from gs and) collections of unbilled income. * Incurred total expenses of 885, + Remitted total taxes withheld of 140,000 to the BIR through Tax Remittance Advice (TRA) + The “Cash-Modified Disbursement System (MDS) Regular” has an unused balance of 43,000 at the end of the period, How much is the surplus (deficit) for the period? a. (595,000) «252,000 b. 135,000 112,000 5. The trial balances of Entity A, a government entity, show th following amounts: © Unadjusted Trial Balance - 2,753,000 * Adjusted Trial Balance - #2,765,000 + Statement of Financial Position (Debit Column) - 1,880,000. * Statement of Financial Performance (Credit) - 1,137,000 How much is the surplus (deficit) for the period? ‘a, ) 252,000 (252,000) . 885,000 a. (743,000) 6. 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) © Capital Outlays (CO) 107 nancial Expenses (FE) ©. All of these expenditures are shown in the statement of financial performance. The entries to record the constructive remittance of taxes withheld through Tax Remittance Advice include all of the owing except a. A debit to the “Cash-Tax Remittance Advice” account b._A credit to the “Cash-Tax Remittance Advic JA debit to the “Subsidy from National Government” account d. A debit to the “Due to BIR” account e. Allof these are included. "account receipt of Notice of Cash Allocation is recorded in the Books of accounts (Journal and Ledger) b. Registry of Allotments and Notice of Cash Allocation (RANCA) © >aandb d. None of these Which of the following is not one of the special journals prescribed by the GAM for NGAs? a./ Sales Journal b. Cash Disbursements Journal ©. Check Disbursements Journal d. Cash'Receipts Journal The 8-digit Revised Chart of Accounts (RCA) Code for expenses starts with number ad 5 wy ‘None of these133, & Chapter > Not recognized as revenues [Royalties PROBLEMS PROBLEM 4-1: TRUE OR FALSE 1. All revenues shall be remitted Special Fund;~unless another id or received is adjusted tothe FV, IF withoutcondition, recognized immediately. Ifwithvcondition, initially recognized as liability until included in ally re 2. Payments to government entities in thi allowed. 3. Revenues of a government entity arise from exchange transactions only. NGAs, revenue from exchange cash received. According to the GAM transactions are measured at the amout value and transaction price | is recognized as revenue, if | bs ___|___non-exchange transaction, ‘Subsidy from NG and other | > Recognized as revenue NGAs from assistance and subsid: According to the GAM for NGA, the receipt of concessionary loans by goverment entities may’ give rise to revenue recognition134 8: The taxable event for income tax is the passage of the ti period for which the tax is levied. 10. The main source of revenue for the government is taxes. PROBLEM 4-2: MULTIPLE CHOICE - THEORY 1, Which of the following is a non-exchange transaction? Taxes are compulsory payments, imposed on persons) properties or activities, intended to provide revenue to the government. Taxes include fees, fines and penalties. a. v. Entity A enters into a long-term contract to provide servi ‘The outcome of the transaction can be estimated the progress on the contract can be measured wi reliability. According to the PPSAS, how should Entity recognize revenue from the contract? a. Ona straight line basis over the céntract term. b,) By reference to the stage of completion of the contract. the reporting date. ¢. Full recognition of contract price upon completion of contract. d. Only to the extent of costs that are expected to recovered, According to the GAM for NGAs, interest revenue recognized a. on a time proportion basis using the effective inter method b. onastraight line basis. ¢. in accordance with the substance of the relevant I agreement, d. when the entity’s right to receive payment is established, Chapter Leasing ces ‘Collection of taxes c. Rendering of legal ser d. Collection of tuition fees eliably at fic 1s and Other Receipts 135, The taxable event for Value added tax (VAT) is the a.) undertaking ofa taxable activity, b. earning of axable income, movement of dutiable goods or services across. the customs boundary. d. any of these ch of the g would result to an increase or decrease in the revenue reported by a goverment entity in statement of financial performance? a. Impairment loss on an amount already recognized, as revenue. b. Receipt of a pledge. Receipt of donation in the form of services ~The repayment of a loan payable is forgiven. kind. It is a type of fund held by a government entity that is designated for special purposes. a, General fund . Trust fund . )Special fund d, Fiduciary fund 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 (ie., credit to the ‘Income from Grants and Donations in Cash’ account)? a. Upon receipt of the grant b. When the grant becomes receivable, provided there is reasonable assurance that the attached condition will be satisfied. cc. When the condition is met. d. When the related expenses for which the grant is to compensate are incurred. tended The receipt of which of the following may not give rise to revenue by a government entity?136 10. Chapter Notice of Cash Allocation Tax Remittance Advice Subsidy from another government enti Inter-agency fund transfer ve a\p A government entity collects fees for the processing of certain permits. The processing of a permit would take 4) few minutes. The processing f scted upon issuance off the permit. This government entity would normally recognize reyenue from permit fees ‘a. ona straight line basis. b._ by reference to the stage of comp! upon collec dd. when the signi the customer. n of the fee. cant risks and rewards are ferred to) The receipt of a performance bond or a security deposit is credited toa cc. cash account d.ajandc PROBLEM 4-3: FOR CLASSROOM DISCUSSION Which of the following is not one of the fundamental principles for revenue under P.D. No. 1445? a. Alll revenues shall be remitted to the BTr and included in the General Fund, unless another law sp allows otherwise. b. Recording of revenue in other types of funds (e.g., Special | Fund) shall be made only when authorized by law. Collections of revenue shall be properly acknowledged through pre-numbered Official Receipts. d. All collections of revenue must be in the form of cash, a. exchange transaction Checks are not acceptable. considered a(an) 137 b) non-exchange transaction _d. any of these ‘According to the GAM for NGAs, all of the following criteria must be met before a government entity recognizes from the 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 gi b._Itis probable that ect c. The am measured reliably d.) The stage of completion can be measured relia ods. mic benefits will flow to the entity. lated costs can be ly. According to th contract. ca GAM for NGAs, when the outcome of a ot be estimated reliably, revenue is 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. only to the extent of costs that are expected to be recovered, d. only upon the completion of the contract th a list price of 100,000, on account. s. The journal entry to recognize of the following except? al__A debit to accounts receivable for 72,000. 'b.) A credit to sales revenue for 972,000. © A debit to sales discount for ®28,000."} d. Allof these are included in the entry. According to the GAM for NGAs, an exchange of goods or 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oe cecil IA ah 2 Chapters io. b. gives rise to revenue measured at the fair value of goods or services given up, adjusted for any cash paid received on the exchange. ¢. aorb, whichever is more clearly determinable. ‘d> does not give rise to revenue. Gifts, donations and goods in-kind with condition a._ as revenue immediately upon the receipt thereof, b. ) initially as liability and recognized as revenue only the condition is satisfied. as revenue measured at fair value only when actu: received. d. directly in eq According to the GAM for NGAs, which of the following mi never give rise to revenue for a government entity a, Services in-kind . Concessionary loan b. Debt forgiveness d. Grant with condition When an amount already recognized as revenue becom subsequently uncoll a.) recognized as expense. b. recognized as an adjustment to the revenue ori recognized. ©. either a or bas an accounting policy choice 4. not recognized h of the following receipts of a government entity give rise to revenue recognition? a. Receipt of excess cash advance b. Receipt of refund for overpayment of expenses ©. Receipt of performance bond >) Receipt of subsidy from the National Government or ot National Government Agencies. Disbursements 139 Learning Objectives 1 Chapter 5 Disbursements State the main concepts in the disbursement of government funds. . Account for the different modes of disbursements. Introduction ursements constitute all payments in cash, in whatever manner e, through cash, check, oF other means). Disbursements shall-be supported =by"Disbursement=Vouchers (including Petty Cash Vouchers) or Payroll. Fundamental Principles for Disbursement of Public Funds I government resources shall be wused.onlyin-accordance withthe law and only for.public purposes. ‘Trustfunds shall be used only for theinspecifie purpose. Fiscal responsibility shall be strictly shared by all those exercising authority over a government agency. ‘The use of government resources shall be approved by proper officials, Claims against government funds. shall be supported with ‘complete documentation. ‘Alllaws*andsregulations applicable to financial transactions shall-be-faithfully.adhered to, including generally accepted principles and practices of accounting, management and fiscal administratison, provided that they do not contravene existing laws and regulations. 1465)152 153 PROBLEMS Under the Advice to Del disbursement, payments from a government e PROBLEM 5-1: TRUE OR FALSE rectly credited to the bank accounts of the payees through 1. No additional cash advance shall be given to any official oF fund/bank transfers. Account (ADA) mode of y are employee unless the previous cash advance given to him ig first liquidated. The only valid modes of disbursement for a government entity are throu gh cash or check, 2. All disbursements require prior certifications to establish their PROBLEM 5-2: MULTIPLE CHOICE jotment is required 3. Entity A acquires equipment from a supplier, on account. A before a disbursement of government funds is made. lender settles the account of Entity A by directly paying thé ‘According to the GAM for NGAs, who shall issue this supplier the proceeds of a loan payable that is recorded in the certification? BIr's books. This transaction is called»Cash Disbursement a.) Budget Officer c. Head of Agency Ceiling(CDQ), | * b. Chief Accountant 4. Requisitioning Individual 4, All disbursements shall be made through Disbursement ‘The Chief Accountant shall charge obligations incurred Vouchers (DVs) or Payroll which are approved by the Head of | against available allotment to ensure that the Requisitioning Unit. _ ||, the NCA is sufficient to meet the disbursement needs. there are no unreleased appropriations. 5. Government entities are not allowed by law to, make no overdraft is incurred. purchases using credit card no excess allotment exists. 6. The NonCash Availment Authority (NCAA) is @ ication on the availability of funds and completeness of disbursement authority issued to government agencies with i documents is required before a disbursement of foreign service posts. ¢ { government funds is made. According to the GAM for NGAs, who shall issue this certification? 7, According to the GAM for NGAs, the Advice to Debit a. Budget Officer ¢. Head of Agency ‘Account (ADA) mode of disbursement can be used only if the .) Chief Accountant 4. Requisitioning Individual payee maintains an account in the same bank where the government entity maintains its account. h of the following results to the recognition, in the books of accounts, of expenses classified as Personnel Services? 8. Disbursements through the Cash Disbursement Ceiling (CDC) a._ Granting of cash advance for payroll results to the recognition of a loan payable in the books of b_) Liquidation of payroll fund accounts of the BTr, . Issuance of office supplies to end users154 9, Chapter d. Set up of payable for payroll According to the GAM for NGAs, disbursements for sala and wages shall be supported by a. Disbursement Vouchers b,) Payroll c. Petty Cash Vouchers . Official Receipts Which of the following results to the recognition of expense?’ a. Granting of cash advance for travel wel b: € d. Remittance of the refund for excess cash advance to BIr 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 © credit to Cash-Constructive Income Remittance . debit to Subsidy from National Government This is used to recognize: (1) in the books of national government agencies, the constructive remittance to BIR and) BOC of taxes and customs’ 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. Notice of Cash Allocation (NCA) ) Tax Remittance Advice (TRA) © Cash Disbursement Ceiling (CDC) d. Non-Cash Availment Authority (NCAA) duties All of the following are considered valid cashless disbursements, except a. purchase of goods using an electronic card CitiBank b. payment of payables using a Non-Cash Availment Authority. remittance of taxes withheld to the BIR through Tax Remittance Advice. 4. online payment through LBP’s eMDS. ©.) payment to a supplier through LBC padala. 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 ©. DFA b. DPWH d. NFA PROBLEM 5-3: MULTIPLE CHOICE 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 Cash-Modified Disbursement System (MDS), Regular Cash in Bank-Local Currency, Current Account Cash-Collecting Officers a 9\s) Entity A sends an employee to an official travel and gives him cash to cover his travelling expenses. Which of the following most likel {try to record the cash disbursement? the ‘Traveling Expenses x Advances to Officers and Employees xx Traveling Expenses vox Cash ~ Modified Disbursement System (MDS), Regular sexx Advances to Officers and Employees x ‘Cash Modified Disbursement System (MDS), Regular 0%56 a. 3. qd, b. 4. Advances to Officers and Employees 6. Cash on Hand Entity A purchases office supp! merchant using an electronic card. s from an authori The entry to record settlement of the transaction is Inventory rox Office Supplies Inventory xox Cash ~ Modified Dis System (MDS), Reg No journal entry. Entity A wants to make disbursements online. Which of Apply for a PayPal account. b. Obtain a debit card or credit catd that is either Visa MasterCard from any bank. ©. Enrol with the MDS of the Land Bank of the Philippines. d. Make a facebook account. Entity A acquires an equipment on account and settles account through Non-Cash Availment Authority (NCAA), The entry to settle the account is Accounts Payabl xox ibsidy from National Government Accounts Payable rox Cash ~ Modified Disbursement System (MDS), Regular Accounts Payabl rx P. tive Income No journal entry. {A receives authorization from the DBM allowing it to use the lections of its foreign service post to pay for the necessary perating expenses of the foreign service post. The entry record the disbursemei Cash in Bank-Foreign Currency Account owi authority is Cur Cash-Collecting Officer Cash-Constructive Income Remittance Subsidy from NG Accounts Payable Cash-Constructive Income Remittance ‘No journal entry. rox Which of the following modes of disburseme similar to a check disbursement? eMDS JADA NCAA ‘4.NBA s is most a b, ‘A government entity makes payment through Advice to Debit Account (ADA). The entry most likely to be used in recording the payment is Accounts p: Cash-Modified Disbursement System (MDS), Regular Accounts payable Subsidy from National Government Accounts pay‘ Cash-ADA None. The transaction is recorded only in the Registries and ORS. A government entity makes constructive remittance of taxes withheld to the BIR through Tax Remittance Advice (TRA). The entry used i ig the transaction is Cash-Tax Rem. \'2 Advice158 Chapter5) E ighhn 159 Subsidy from National Government 20 necessary operating expenses of the foreign service post. This b. Due to BIR 1x authorization is called Cash-Tax Remittance Advice vox ‘Cash Disbursement Ceiling (CDC) c aandb d. None. The transaction is recorded only in the Registries ar ors, b. Non-Cash Availment Authority (NCAA) Electronic Modified Disbursement System ( d. Advice to Debit Account (ADA) DS) 10. Which of the following modes of disbursements would resull Entity A disburses a check chargeable against its checking to the recognition of a loan payable in books of the BT:? maintained: with Government Servicing Bank. The a..CDC ©. ADA journal entry to record the disbursement involves a credit to b. NCAA 4. UFC which of the following accounts? a. Cash-Treasury/Agency Deposit, Regular b._Cash-Modified Disbursement System (MDS), Regular PROBLEM 5-4: FOR CLASSROOM DISCUSSION Cash in Bank-Local Currency, Current Account 1, Which of the following is not used in processi d. Cash-Collecting Officers disbursements? a. DVs c.PCVs 6. Which of the following entries would most likely constitute a b. Payroll 4. ORs cash disbursement, rather than a check disbursement? a. Electricity Expenses 0% 2. Which of the following is not a form of disbursem ‘Cash Modified Disbursement authority? System (MDS), Regular x a. NCA NTA b. TRA , Allotment expenses p. Accounts Payable wx 3. It is an authority issued by the DBM to central, regional at provincial offices and operating units to cover their bi requirements. It specifies the maximum amount of cash +) iris Oe ea Ret a can be withdrawn from a government servicing bank in Cea MR RDEG CLE eee eeeaa System (MDS), Regular wx a: Notice of Cash Allocation (NCA) To record grant ofesh advance for b. Tax Remittance Advice (TRA) travel © Cash Disbursement Ceiling (CDC) d. None. All of these are check disbursements. d Non-Cash Availment Authority (NCAA) 7. Which of the following would most likely constitute a 4. Entity A has a foreign service post. During the period, Entit disbursement through Advice to Debit Account (ADA)? A receives authorization from the DBM allowing it to use collections of its foreign service post to defray fora 160 through ‘The disbursement is not recorded in the books of accounts, qd purchase is Office Supplies Inventory sh (iit ke Chapter Electricity Expenses wx Cash ~ Modified Disbursement 10x wx Advances to Officers and Employees wx Cash - Modified Disbursement System (MDS), Regular To record gra 1 f these arc disbursements, true regarding disbursements tronic Modified Disbursement System (e¢MDS)? the issuance of Mi check, ‘The disbursement is made t that is swiped in a card s merchant. ‘ough the use of a credit card) e machine of an authorized) The disbursement is made through an online transaction, horized ig an electronic card. The entry to record hases office supplies from an xx Accounts Payable Accounts Payable Cash ~ Modified Disbursement ‘System (MDS), Regular Office Supplies Inventory Cash - Modified Disbursement System (MDS), Regular mal entry, Xxx Disbursements 161 10. Entity A acquires an 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 aan) a. Credit Card transaction b. Advice to Debit Account c. Cash Disbursement Ceiling d,) Non-Cash Availment Authority180 Chapter 6 Summary: Fi ‘asset is any asset that is: cash or right to receive cash. or other financial asset, an equity instrument of another entity, ‘or contractual right to exchange financial instruments under potentially favorable condition. Examples: cash and cash equivalents, receivables, investments in debt and equity securities, and derivative assets. The Petty Cash Fund of a government entity is: - _ maintained using the imprest system. - _ sufficient to defray recurring petty expenses for 1 month. - used for disbursements not exceeding 15,000 per transaction. - replenished as soon as disbursements reach at least 75' or as needed. government entity prepares monthly bank reconci using the adjusted balance method. + Only debt instruments acquired 3 months or less before thei scheduled maturity date can qualify.as cash equivalents. + Receivables are initially measured at fair value ph transaction costs and subsequently measured at amortize cost. sequent measurement purposes, a government enti its financial assets into the following categories: ( Financial asset at fair value through surplus or deficit; (b Held-to-maturity investments; (c) Loans and receivables; and (a) Available-for-sale financial assets. Financial Assets 181 PROBLEMS PROBLEM 6-1: TRUE OR FALSE According to the GAM for NGAs, all financial assets are initially measured at fair value Accordirig to: the GAM for NGAs, government entities shall Prepare bank reconciliations only at year-end or whenever need arises, Only debt instruments with remaining maturity of 3 months or less can qualify as cash equivalents. The PCF of a government entity is replenished when disbursements reach at least 90%, or as needed. No journal entry is prepared when a disbursement is made ‘out of the petty cash fund. A government entity established a 30,000 petty cash fund. ‘The custodian must be bonded for at least 5,000, ing to the GAM for NGAs, all financial assets shall be ‘measured at fair value plus transaction costs, ‘Transaction costs on financial assets classified under the held to maturity category are expensed outright. A derivative derives its value from the changes in value of a specified rate, price, event or some other variable, Risk management is the process of identifying the desired level of risk, identifying the actual level of risk and altering the latter to equal the former.182 PROBLEM 6-2: MULTIPLE CHOICE 1 Which of the fol a. Petty cash f ig is not considered a financial asset? id b. Investment in debt sect c. Accounts receivable ‘@> Prepaid assets A cash shortage of a government entity is most likely record asa a. debit to a receivable account b. debit to a cash shortage or overage account ¢. credit to miscellaneous income account d. credit to a cash shortage or overage account Dishonored checks are recorded by a government entity as a. Notes receivable ¢. Accounts receivable B. Other receivables d. Losses ‘The entry to record the replenishment of a petty cash fund of, government entity is Expense accounts x00 Cash-Modified Disbursement System (MDS), Regular Expense accounts xx Petty Cash Expense accounts wx Cash-Collecting Officers Expense accounts wax Cash-Treasury/Agen: osit, Regular Under this method of bank reconciliation statem preparation, the unadjusted book and bank balances brought to an adjusted balance that is reported on statement of financial position. a. Bank to Book Method b. Book to Bank Method ¢: Adjusted Balance Method 183 cial Assets Which of the following may be paid through the petty cash fund of a government entity? a,_ Rent worth 12,000. b. Pantry supplies worth 15,000. ©. Office supplies worth ®20,000. d. None of these. Entity A maintains a petty cash fund. At any given point of time, the cash on hand and the petty cash vouchers must b 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 Pretty Cash System b. Fluctuating Balance System d. Imprest System According to the GAM for NGAs, the establishment of a petty cash fund a.) requires the approval of the Head of Agency. requires the approval of the Chief Accountant. requires the approval of the President of the Philippines. does not require any formal approval because petty cash funds are likely to be immaterial. aos ‘The “Loans Receivable” account is most likely to be used in the books of accounts of which of the following government agencies? a. COA ¢. BTr b. NIA All of these 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184 Chapter Assets x 185 ‘ investment (or only a very a. 1,456,792 2. 1,582,711 b. 1,330,873 2,000,000 d. Itis settled at a future date. 5. The interest income in 20x is a, 221,580 ¢, 186,322 PROBLEM 6-3: MULTIPLE CHOICE b. 203,951 4. 200,000 1. According to the GAM f costs that are directly NGAs, these refer rributable to the acq rent is classified as available for sale financial disposal of a financial instrument. s fair value at year-end is 1,800,000, how much is a, Costs to sell c. Financial costs the change infair value? ,) Transaction costs . Variable costs 195,709 238,869 is not one of the categories of financial under the GAM for NGAs? If the investment is classified as available for sale financial a. Held-to-maturity investments asset, how much is the interest income in 20x1? b. Loans and receivables a 221,580 €. 186,322 . Available-for-sale financial assets b. 203,951 . 200,000 @, Financial asset through other comprehensive income 8. According to the GAM for NGAs, changes in fair value of 3, Entity A acquires an investment for 1,000,000. Transact costs amount to 10,000. At year-end, jent has a fait value of 900,000. 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 «©.110,000 b. 90,000 4.0 9. Entity A acquires an investment for 100,000 and incurs "i transaction costs of #10,000. At year-end, the fair value of the Use the fo nformation for the next four q investment is 80,000. Entity A recognizes a ®30,000 loss from On January 1, 20x1, Entity A acquires 10-year, 10%, 2,000,000 face the change in fair value. The investment would most likely to amount bonds for 1,456,792 and classifies them as held-to- have been classified under which of the following categories maturity investments. Transaction costs on the acquisition amount of financial assets? to 125,919, The issuer pays annual interest every December 31 ‘,/ Available-for-sale financial assets The effective interest rate is 14%, . Financial asset through surplus or deficit . Held-to-maturity investments 4. The d. Loans and receivables 20x1 is al carrying amount of the investment on January186 Chay 10. Entity A acquires an investment for 100,000 and transaction costs of 10,000. At year-end, the fair value of investment is 120,000. However, the investment appropriately reported in the year-end statement of finan¢ kely to have been clas Wg categories of financial assets? ble-for-sale financial assets Held-to-maturity investments Loans and receivables |. Cannot be determined due to insufficie ed under which of information PROBLEM 6-4: FOR CLASSROOM DISCUSSION 1. According to the GAM for NGAs, a government entity’s comprises all of the following except a. cash on hand . cash equivalents b. cash in bank 4. cash treasury accounts 2. Which of the following is excluded from the amount of « that is reported in the statement of financial position of government entity’ @. unreleased checks drawn, b. cancelled checks drawn ‘c, undeposited collections d. post-dated checks receiv 3. An unexplained cash overage of a government entity recorded as a a. credit to a payable account b, “debit to a cash shortage or overage account ©. -€redit to miscellaneous income account 4. credit to a cash shortage or overage account 4. All of the following are considered internal controls over ca: except a, Requiring a cash custodian to be properly bonded amount of bond shall not be less than the c accountability of the custodian. Fis Bopp mncial Assets a b. Preparing a bank recone for each bank account maintained by a government entity. Making estimates of recurring expenses _before establishing an amount for a petty cash fund. cash fund under a Fluctua Balance System wherein the total cash on hand and p cash vouchers may or may not be equal to a fixed amount ash fund at any given point of time. e wens Siskel ERLdete oe an bORy clone making purchases. The per transaction threshold for petty cash disbursements of a government entity is. a. 5,000 b. 10,000 A government agency sh each bank account mai prepared using the a. Bank to Book Method b. Book to Bank Method ‘¢/ Adjusted Balance Method d. Any of these 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 . Deposits in transit b. Debit memo d. Outstanding checks According to the GAM for NGAs, receivables are measured at Initial Subsequent Fair value Amortized cost Amortized cost Jue minus transaction costs. Amortized cost Fair value Fair value188 hapten Inetories oe 9. The subsequent changes in the fair value of an investment t Chapter 7 is classified as available for sale are recognized in + 7 a. surplus or deficit Inventories ~ b. net assets or equity 2) not recognized d. any of these as an accounting policy choice 10. According to the GAM for NGAs, the very purpose derivatives is ‘a. “risk management risk incurrence b. speculation d.aorb Learning Objectives for inventories by a government entity. and we procedures in the r inventories by agovernment entity... Introduction Inventories are assets: a, Held=for-sale or ‘distribution in the ordinary course of ‘operations (Finished goods); b. dnvthe-process.of production for sale or distribution (Work in process); or ‘pia ‘ c. ithe form-of materials.or.supplies, to be-consumed in the production process or distributed in the rendering of services (Raw materials and supplies) More specific consists of the following: _ Inventory Hild for Sale (eg, medicines fr sale in government pharmacies) b. dnventory Held for Distribution (e.g, rice and other welfare goods held for distribution) c. Inventory. Held for Manufacturing (e.g., raw materials, work- in-process) 4. Inventory” Held for Consumption) (eg., office supplies inventory) e, Semi-Expendable Property ~.. consists of machinery, equipment, furniture and fixtures and similar items that are not-capitalizedas~PPE because their costs are sbelowethe 15,000 capitalization-threshold for PPE. the inventories of a government entity196 Chapter 7 Summary: not used by government entities. The inventories of government entities include the following! d. Inventory Custodian Slip ~ prepared when issuing semie expendable property. Inventory Held for Sale, Inventory Held for Distribu supplies), and Sei below the P15,000 capitalization threshold for PPE). Goods held for sale are subsequently measured at the Lower Cost and NRV while goods held for distribution are subsequently measured at the Lower of Cost and Current replacement cost. The FIFO cost formula and the Periodic inventory system PROBLEMS PROBLEM 7-1; TRUE OR FALSE According to the GAM for NGAs, inventories of government entities are subsequently measured at net realizable value or current replacement cost depending on whether the inventory is classified as held for sale or held for distribution. ‘According to the GAM for NGAs, purchases equipment, furniture and fixtures and si 10,000 capi threshol inventories. machinery rems below the for PPE are recorded as Relief goods, office supplies, equipment and furniture and fixture are items that may appropriately be recorded as inventories by a government entity. The GAM for NGAs allows government entities to use the FIFO cost flow formula, The GAM for NGAs allows government entities to use a periodic inventory system. The specific identification cost formula is not available for use by government entities, according to the GAM for NGAs. The Purchase Request (PR) form is prepared when end users request for the issuance of items of inventory that are available on stock, If the beginning balance and the cost be P120. inventory is P50, the net purchases f goods sold is P30, the ending are PI inventory198. Chapter: Fact pattern Entity A, a government enti period, carrying amount of P2. (1) brown egg for P3 and one (1) blue egg for P4. Entity A sold brown egg during the per 9. Under the Specific identification cost formula, of sale is P2. 10. If the eggs are‘ordinarily interchangeable, Entity A’s PROBLEM 7-2: MULTIPLE CHOICE if sells eggs. At the start of ry consisted of one (1) red egg with ing the period, Entity A acquired ty A’s inv is P25, assuming the sale occurred only after purchases were made. Entity A, a government , purchases inventories. To record a purchase, Entity A would most likely debit the (an) a) Inventory account c. Expense account b. Purchases account daorb Entity A, a government hospital, acquires medicines to be sold record the medicines acquired as a. Semi-Expendable Property b. Inventory Held for Consump ©. Inventory Held for Distribution 4.) Inventory Held for Entity A, a government entity, purchases relief are to be held on standby calamity strikes. Entity A would most likely cla: purchased as a. Inventory Held b) Inventory Held © Purchases d. None of these, only a note di osure shall be made Inventories 199 ‘According to the GAM for NGAs, this shall be used for large numbers of items of inventory that are ordinarily Weighted average cost applied in a periodic inventory system sighted average cost applied in a perpetual inventory these as a matter of accounting policy choice This refers to the cost an entity wou! the reporting date. a. Net realizable value b. Fair ve \cur to acquire an asset Current replacement cost d. Present value 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 ‘€) Books to be distributed to students in public schools d._ Forest products held for sale Which of the to the recognition of a. The inventory is written down. b,, The inventory is distributed for free. c.” The inventory is exchanged for dissimilar inventory. @._ The inventory is consumed in the manufacturing process. ing, events or transactions would not lead e cost of inventory as expense? on of a government entity uses this or the movements and balances inventories. a._ Stock Card %. \Stock Ledger Card «Journal Entry d. Special JournalChapter: he following statements correctly differentiates Stock Card from the Stock Ledger Card? a. The Stock Ledger Card is maint d by the Budget b. The Stock Card is subject to audit by the COA while Stock Ledger Card is not. . The Stock Card shows quantities only while the St Ledger Card shows monetary balances only. . The Stock Card shows quantities only while the St Ledger Card shows quantities amounts. 10. This document is prepared when end users request for issuance of inventories that are available on stock. a. Purchase Requisition Form Custodian Inventory Slip Purchase Order Requisition and Issue Slip Ros PROBLEM 7-3: MULTIPLE CHOICE 1. Entity A, a government entity, purchases inventory to be for sale in the ordinary course of activities. Which of following is the correct entry to record the purchase? Inventory 30x nts Payable Xxx Accounts Payable rx © aorb depending on the accounting policy being used d. none, a government entity cannot hold inventories sale; only for consumption. 201 Entity A, a government entity, distributed welfare goods to the intended recipients. The entry to recognize the event is. a. Cost xx ire Goods for Distribution xxx b.) Welfare Goods Expense rox Welfare Goods for Distribution rox Distribution costs rox Welfare Goods for Distribu 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. 3. At year-end, Entity A, a government entity, determines the wing information: ‘+ Carrying amount of goods held for distribution — 100,000 * Net realizable value~ 80,000. * Current replacement cost ~ 90,000. How much of the carrying amount of the inventory is Tecognized as expense? a 10,000 b. 20,000 90,000 d. None of these the following information for the next two 4 Entity A, a government entity, determines the following information regarding the inventory of Goods A, a non- Units Unit ‘Total Cost Cost Balance at January 1, 20x1 3,000 P19.55, 58,650 Purchases: wary 6, 20x1 10,200 21.50 219,300 Fy 26, 20x1 2,250 20.60 46,350 wary 7, 20x1 2,700 Fy 31, 2002 7,200202 Chapter 203 4. _How-much is ending inventory? 4. Which of the following cost formulas is not available for use Ca 116382 117,300 by government entities? b. 116,495 d. Any of these a. Specific identification c. Weighted Average by) FIFO d. All of these are available 5, How much is the cost of salé? a, 207,805 207,000 5. The GAM for NGAs requires the use of which of the following 4. 207,918 d. Any of these. inventory systems? a.) Perpetual inventory system caorb b. Periodic inventory system d. none of these PROBLEM 7-4: FOR CLASSROOM DISCUSSION 1. Entity A, a government entity, purchases furniture fixtures amounting to P14,000. Entity A would most likel record the purchase as Property, Plant and Equipment Inventory Held for Consumption Inventory Held for Manufacturing ‘Semi-Expendable Property 6. Government entities record purchases of inventories a} inan inventory account caorb . in the Purchases account d. as expenses 7. 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 . cost of insurance while the goods are in transit d. advertisement cost that resulted to the resale of inventory purchased apoe 2. Accountable forms such as pre-printed forms used government transactions are most likely to be classified by government entity as a._ Inventory Held for Consumption b. Inventory Held for Sale . Semi-Expendable Property d. Not considered inventory, according to the GAM NGAs ‘Arrange the following in the sequence they are used in the requisition and receipt of inventories by a government entity 1. Inspection and Acceptance Report (IAR) I, _ Disbursement Voucher (DV) Purchase Request (PR) IV. Journal entry V. Purchase Order (PO). VI. Stock Card (SC) 3. Inventories are initially measured at cost and subsequent ‘measured at a. the Lower of Cost and Net realizable value for goods hel for sale i b. the Lower of Cost and Current replacement cost for g held for distribut © aandb . cost |, Vand IV 11, Viand IV ac IML, V, 1, VI, IV and Il b. IL, V, 1 IV, Vand IL204 Agriculture 205, 9. This is maintained in the Property/Supply Division to ret Chapter 8 the movements of inventories. a. Stock Card (SC) Agriculture b, Property/Supply Card (PSC) . Supplies Ledger Card (SLC) d. Magic Card (MC) | Learning Objectives 1. Differentiate between , the following: biol agricultural produce and inventory. 2. State the initial and subsequent measurements of assets and agricultural produce. is is used to report wasted materials, such as destr spare parts and other spoilages. Wasted Stocks Card (WSC Waste Materials Report Report on the Physical Count of Inventories Inventory Custodian Slip aos Introduction vein A ire means farming or the process sing livestock.) In this chay principles used for assets, resulting from agricultural activities. producing crops at , we will lear the accounting ies, income and expenses Agricultural Activity ~ ig the management by an entity of the ‘biological transformation and-harvest.of biological. assets for sale, exchange or _mon-exchange transactions, in into agricultural produce, or into addition: Examples of agricultural . activities include: tock, fore or perennial cropping, cultivi chards and plantations, floriculture, and aquaculture fish farming The following are the common features of agricultural activities: a. Capability to change — living animals and plants are capable-of- ‘biological transformation; b. Management of change. + management faci transformation by enhancing, or at-least stabilizing, conditions anecessary=for-the= process-to-take~place. Such management214 PROBLEMS PROBLEM 8-1: TRUE OR FALSE 1. Living animals and plants are always accounted for biological assets, ly and subsequently measured 3. Agricultural produce is measured at fair value less costs to only at the point of harvest, 4, An essential element of agricultural acti management of the biological transformation assets. 5. Entity A’s dairy cattle gave birth to a calf. The fair value le costs to sell of the new born calf is ®10,000. Entity A recogni: ‘a gain of 10,000 from the 6. A loss can arise from the initial measurement of a biologi as costs. 8. Entity A acquires a gical asset for P100, equal to value, and incurs transaction cost of P10 on the purchase | the asset's costs to 20, Entity A will recognize a loss of the purchased asset: 9. Entity A recognizes a gain of 100 from the change in F of its biological assets during the period. If the change FVLCS due to price change is #70, the change in FVLCS due! physical change must be 40. Agrhalure 215 10. If there are more than one active markets for a biological asset, the entity shall use the price in the market expected to be used when determining fair value, PROBLEM 8-2: MULTIPLE CHOICE 1. According to the GAM for NGAs, a biol a. an animator piant ‘a living animal or plant b. anasset used in farming ~-d.a harvested product ies include all of The common features of agricultural acti the following except a. capability to change b. management of change measurement of change ‘wind of change 3. Which of the following is an agricultural produce? a. carabao extra tice b.) harvested palay 4. powdered milk 4. According to the GAM for NGAs, biological assets are measured as Initial measurement Subsequent measurement @) fair value less costs to sell fair value less costs to sell b. cost cost less accumulated depreciation © cost cost less accumulated t depreciation and impairment losses d. fair value less costs to sell cost 5. Which of the following are not considered costs to sell? a commissions to brokers b._ levies by regulatory agencies and commodity exchanges c._ transfer taxes and duties d.) transport costs