Name:______________________________________ Date: ___________

Module 2 Quiz
ACC117: Accounting for Government and Non-Profit Organizations

I. MULTIPLE CHOICE (25 pts.)

Direction: Write the letter of the correct/best answer on your answer sheet. Strictly no erasures.
Use capital letters only.

Government entities record purchases of inventories

a. in an inventory account
1 b. in the Purchases account
c. a orb
d. as expenses
Which of the following assets would most likely not be assigned a residual value by a
government entity?
a. A major part of an equipment
2
b. A building held as investment property
c. A major tool
d. Infrastructure asset
The national government receives a P10M grant from a foreign government condition on
theconstruction of a highway. According to the GAM for NGAs, when shall the national
government recognize revenue from the grant?
a. when the grant is received
3
b. when the grant becomes receivable
c. when the grant becomes receivable and there is reasonable assurance that the
attachedcondition will be satisfied
d. when the condition is satisfied
During the year Entity A, an NGA, incurred interest of 200,000 on a loan taken to
specifically finance the construction of a building. The proceeds of a loan were
temporarily invested and earned interest income of 20,000. Which of the following
entries best reflects the recognition of the interest in the books of accounts of Entity A?
a. Interest expense 200,000
Interest Payable 200,000
4
b. Interest expense 180,000
Interest Payable 180,000
c. Construction in Progress-Buildingsand Other Structures 180,000
Interest Payable 180,000
d. Buildings and Other Structures 180,000
Interest Payable 180,000
Which of the following receipts of a government entity will give rise to revenue
recognition?
5
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
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
6
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
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
7 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.
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.
8
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.
Entity A acquires a building through self-construction (construction by administration).
The initial cost of the building will most likely be based on which of the following?
a. The contract price.
9 b. The costs of direct materials, direct labor and construction overhead, excluding
wastages.
c. a or b
d. Fair value at the acquisition date.
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
10
b. Cash-Modified Disbursement System (MDS), Regular
c. Cash-in-Bank-Local Currency, Current Account
d. Cash-Collecting Officers
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
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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)
 b. Tax Remittance Advice (TRA)
c. Cash Disbursement Ceiling (CDC)
d. Non-Cash Availment Authority (NCAA)
Which of the following is a non-exchange transaction?
a. Leasing
12 b. Collection of taxes
c. Rendering of legal services
d. Collection of tuition fees
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
13
b. DPWH
c. DFA
d. NFA
According to the GAM for NGAs, cash discounts not taken on purchases of items of
PPE are
a. included in the cost of PPE
14
b. recognized as “Other Losses”
c. ignored
d. debited to the “Purchase Discount Lost” account
Which of the following results to the recognition of expense?
a. Granting of cash advance for travel
15 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.
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
16 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.
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.
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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.
Entity A, a government entity, purchases furniture and fixtures amounting to P14,000.
Entity A would most likely record the purchase as
18 a. Property, Plant and Equipment
b. Inventory Held for Consumption
c. Inventory Held for Manufacturing
 d. Semi-Expendable Property
Which of the following assets is generally not subject to depreciation?
a. Heritage assets
19 b. Infrastructure assets
c. Roads
d. a and b
Transaction costs on issuing bonds are
a. expensed outright
20 b. added to the initial carrying amount of the bonds
C. deducted from the initial carrying amount of the bonds
d. subsequently amortized as expense using the straight line method
A type of fund held by a government entity that is designated for special purposes.
a. General fund
21 b. Special fund
c. Trust fund
d. Fiduciary fund
Entity A acquires a building by awarding a construction contract to a contractor. The
initial cost of the building will most likely be based on which of the following?
a. The contract price.
22 b. The costs of direct materials, direct labor and construction overhead, excluding
wastages.
c. a or b
d. Fair value at the acquisition date.
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
23 withdrawn from a government servicing bank in a certain period.
a. Notice of Cash Allocation (NCA)
b. Tax Remittance Advice (TRA)
c. Cash Disbursement Ceiling (CDC)
d. Non-Cash Availment Authority (NCAA)
Which of the following events or transactions would not lead to the recognition of the
cost of i nventory as expense?
a. The inventory is written down.
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b. The inventory is distributed for free.
c. The inventory is exchanged for dissimilar inventory.
d. The inventory is consumed in the manufacturing process.
Which of the following is not one of the characteristics of property, plant and
equipment?
a. It is a tangible asset.
25 b. It is held for use in the production or supply of goods, services or program outputs, for
rental to others, or for administrative purposes.
c. It is expected to be used for more than one reporting period.
d. It is intended for resale in the ordinary course of operations.
II. TRUE OR FALSE (25 pts.)

Direction: Write TRUE if the statement is correct. Otherwise, write FALSE. Strictly no
erasures. Use capital letters only.

The constructive remittance of taxes withheld through the TRA gives rise to the
1
recognition of revenue.
According to the GAM for NGAs, government entities may choose either the cost model
2
or the revaluation model to subsequently measure their PPE.
The capitalization threshold for items of PPE by government entities if P15,000, which
3
is equal to the petty cash disbursement limit.
According to the GAM for NGAs, the receipt of concessionary loans by government
4
entities may give rise to revenue recognition.
5 Government entities are not allowed by law to make purchases using credit card.
Items below the capitalization threshold of PPE are recognized as SemiExpandable
6
Property – a separate class of PPE.
The specific identification cost formula is not available for use by government entities,
7
according to the GAM for NGAs.
The Purchase Request (PR) form is prepared when end users request for the issuance of
8
items of inventory that are available on stock.
All disbursements shall be made through Disbursement Vouchers (DVs) or Payroll
9
which are approved by the Head of the Requisitioning Unit.
The Non-Cash Availment Authority (NCAA) is a disbursement authority issued to
10
government agencies with foreign service posts.
Entity A acquires an item of PPE from an inter-agency transfer. Entity A will not
11
recognize any gain or loss from this transaction.
The taxable event for income tax is the passage of the time period for which the tax is
12
levied.
If one or more of the liability recognition criteria are not met, the item is a contingent
13
liability.
14 Provisions are never discounted to their present value.
15 The main source of revenue for the government is taxes.
When cash flows are deferred, the fair value of the consideration receivable is its present
16
value.
According to the GAM for NGAs, inventories of government entities are subsequently
17 measured at net realizable value or current replacement cost depending on whether the
inventory is classified as held for sale or held for distribution.
18 Legal obligations arise only from law.
The only valid modes of disbursement for a government entity are through cash or
19
check.
Taxes are compulsory payments, imposed on persons, properties or activities, intended
20
to provide revenue to the government. Taxes include fees, fines and penalties.
Entity A issues 10-year, term bonds with face amount of P20 for P12 and incurs
21
transaction costs of P1 on the issuance. The initial carrying amount of the bonds is P13.
22 The GAM for NGAs allows government entities to use a periodic inventory system.
According to the GAM for NGAs, revenue from exchange transactions are measured at
23
the amount of cash received.
24 A provision is a liability of uncertain timing or amount.
Under the Advice to Debit Account (ADA) mode of disbursement, payments from a
25 government entity are directly credited to the bank accounts of the payees through
fund/bank transfers.