Govacc Combi

GENERAL PRINCIPLES ON ACCOUNTING FOR NPES
1. Which of the following is not a condition to be satisfied for nonrecognition of contributed collection items?
None of these
2. Income earned from permanent endowments that can be spent only on certain programs but has not yet
been spent would be recorded in the statement of activities as
Temporarily restricted
3. Which of the following is not a required external financial statement of an NPE?

Management Discussion and Analysis
4. When are conditional promises to give cash recognized in the financial statements?
When the promise becomes unconditional in status
5. The fair value of contributions cannot be determined by using

None of the above
6. Which of the following contributions are recognized in the statement of activities?

Contributions of services that enhance nonfinancial assets
7. Which of the following contributed services are not recognized in the financial statements?
Contributed services performed by persons not having specialized skills
8. Which statement is not correct?

Depreciation expense is not recognized by an NPE
9. Your answer should be a whole number. Do not use comma, decimal, and peso sign.
Maxi Organization, an NPE disclosed the following in its 20x1 notes to the financial statements.
a. Received shares valued at P8,000,000 to be retained with the dividends used to support current
operations
b. Net resources of P4,000,000 invested in plant assets
c. Received equipment valued at P20,000,000 which is to be sold with the proceeds used to renovate the
children’s playground
d. Board-designated fund of P2,400,000
e. Received P80,000 cash from a donor who did not specify any purpose restrictions on the contribution
however, the donor specified that the donation should be used until 20x2
f. Received P3,200,000 from a donor who stipulated that the contribution shall be invested indefinitely
and that the earnings shall be used for scholarships. Investment income in 20x1 amounted to P200,000
The total permanently net assets is: 11200000
10. Your answer should be a whole number. Do not use comma, decimal, and peso sign. Use parentheses to
indicate DECREASE.
K2, an NPE, had the following transactions during 20x1:

a. Received contribution of P800,000 to be used for student scholarships. Of this amount, P480,000 was
expended during the year
b. Expended P200,000 for student scholarships from a P240,000 grant received in previous year
The net effect of the transactions in K2’s 20x1 unrestricted net assets is: 0
11. Your answer should be a whole number. Do not use comma, decimal, and peso sign to encode your
answer.
GreenThinkers Organization, a non-profit organization, received the following donations during the period:
a. January 1, 20x1: Land with fair value of P4,000,000 to be used at the discretion of GreenThinkers
b. February 15, 20x1: Cash of P8,000,000, restricted for the acquisition of a truck. The truck will be used
in GreenThinker’s outreach programs
c. March 1, 20x1: Investment in equity securities with fair value of P2,000,000 to be held indefinitely. Only
the investment income shall be used by GreenThinkers on its current operations
d. May 1, 20x1: JPIA and JPAMA members from different universities contributed services in a tree-
planting activity initiated by GreenThinkers. Although the volunteers rendered their services for free,
GreenThinkers estimates that the fair value of these services would amount to P20,000
On June 30, 20x1, GreenThinkers acquired a truck for P8,000,000 and received dividends of P240,000 from
the equity securities.
The net effect of the transactions in the year-end unrestricted net assets (ignore depreciation) is: 12240000
12. In the absence of donor’s stipulations, gains recognized on an endowment would be reported in the
statement of financial activities as increases in
Unrestricted net assets
13. Which of the following categories of net assets is not required to be shown in the statement of financial
position?
Board-restricted
14. A local citizen gives a not-for-profit entity a cash donation that is restricted for research activities. The
money shall be returned to the donor if the NPE fails to meet the condition. The money should be recorded as
Deferred revenue
15. Reciprocal transfers where both parties give and receive something of value are
Exchange transactions
answer.
The permanently restricted contributions revenue is: 2000000

17. Which of the following is not a required characteristic of a private not-for-profit organizations per the
definition given by GAAP
An organization dedicated to service for the public good
operations
The total unrestricted net assets is: 6400000
answer.
The temporarily restricted contributions revenue is: 8000000
20. Investments are reported by NPEs at

Fair value
answer.
The net effect of the transactions in the year-end permanently restricted net assets is: 2000000
22. The following gifts are received in Year 1 by an NPE:

a. P2,000 specified by the donor to be used to pay salaries
b. P10,000 for new conference room furniture
c. P5,000 to be held for one year before being expended
The salaries are paid in Year 2 and the conference room furniture is purchased in Year 1.
How much should be shown as increases in Temporarily Restricted Net Assets in Year 1?
P7,000.00
23. Donor-restricted contributions are recognized in the financial statements when

Received

How much should be reclassified on the Statement of Activities in Year 2 from the Temporarily
Restricted Net Assets to the Unrestricted column?
P7,000.00
Fighting Organization, an NPE, received the following contributions during 20x1:
a. P400,000 cash restricted for the purchase of equipment
b. P1,000,000 cash restricted for the renovation of an old building owned by Fighting
Fighting made the renovation in 20x2 and acquired the equipment in 20x3.
Net assets released from restrictions in Fighting’s 20x2 statement of activities is: 1000000
26. When are unconditional promises to give recognized as revenue?

In the period the promise is received
answer.
The “net assets released from restrictions” in 20x1 is: 8000000
28. A contribution is a(an)

Unconditional transfer of cash
29. Unconditional promise to give that include promises of payments due in future periods are reported as
Restricted revenues
30. A nonprofit organization’s restricted fund typically is established in rationale to

Provisions of a contribution to the organization
31. On the financial statement of an NPE, “fund balance” is replaced by

Net assets
answer.
The unrestricted contributions revenue is: 4000000
33. Alice makes a cash gift which has no strings attached to a political party. It is recorded as
Revenue-unrestricted contribution
34. Which of the following donated services would not be recognized as contributions in the statement of
activities?
Services contributed by lay volunteers manning a phone bank
35. Contributions are reported in the statement of activities using all of the following categories except
Board-restricted
36. Which of the following contributions are not recognized in the statement of activities?
None of these
37. Income earned from temporary endowments that can be spent only on certain programs but has not yet
been spent would be reported in the statement of activities as
Revlove Organization, an NPE, received the following during 20x1:
a. Land with fair value of P40,000,000 to be sold to acquire a bus

b. Shares of stocks with fair value of P12,000,000 to be retained indefinitely. The dividends from the
shares will be used to support current operations.
As a result of these donations, Revlove should report an increase in temporarily restricted net assets in the
amount of: 40000000
39. One characteristic of NPEs that is comparable with that of government entities is
Stewardship of resources
operations
The total temporarily restricted net assets is: 20280000
41. How would the expiration of a prior-year donor restriction as to purpose be reflected in the current year’s
statement of activities?
A separate line item reclassification between the temporarily restricted and unrestricted categories
42. Which of the following contributions are credited to a Deferred Revenue account until spending occurs?
None of these
Total revenue recognized on the contributions in 20x1 is: 1400000
44. How would spending of money donated in the prior year for spending in the current year be reported in the
As an expense in the unrestricted category
indicate DECREASE.

The net effect of the transactions in K2’s 20x1 temporarily restricted net assets is: 120000
answer.
The net effect of the transactions in the year-end temporarily restricted net assets (ignore depreciation) is: 0
47. Unconditional transfers of cash or other resources to an NPE in a voluntary nonreciprocal transaction is the
definition of
Contributions
48. A gift in kind for which there is little or no discretion on disposition should be accounted for by an NPE as
An agency transaction
49. Which of the following contributions are credited directly to the entity’s net assets when received?
None of these
50. A pledge is unconditional if it

Depends only on the passage of time (ITO ANG SAGOT KAPAG WALA SA CHIOCES YUNG NASA #51)

Depends only on the passage of time or depends on the demand by the university to be paid
ACCOUNTING FOR NPES - HOSPITALS

1. The governing board of Simplicity Hospital, which is operated by a religious organization, designated
P500,000 of cash for future expansion of the hospital. On the hospital's statement of financial position, the
cash designated for future plant expansion would be disclosed in which of the following classes of net assets?
2. Faith Hospital, an NPE, rendered P2,400,000 in services to patients, P2,000,000 of which is charged to
PhilHealth. It is estimated that only P2,120,000 will be collected. Of the P280,000 difference, P140,000 is the
estimated contractual agreements with PhilHealth, P20,000 is allowance for discounts to hospital employees,
P80,000 is charity care, and P40,000 is the uncollectible accounts. The net patient revenue is:
2160000
3. The following accounts are taken from ledger balances of Caring & Loving Hospital, an NPE:
Gross patient service revenue, P11,049,200
Research grant revenue to the extent expended, P361,000
Revenues from sale of cafeteria meals to guest and employees, P108,000
Donated services of nurses and physicians (otherwise purchase), P145,000
Unrestricted gifts and grants, P100,200
Unrestricted endowment income, P12,000
Gifts restricted for equipment purchase, P540,000
Donor-restricted investments for permanent endowment, P150,000
Temporarily restricted endowment income, P25,000
Revenues from parking lot, P31,000
Revenues from vending machine, P68,000
Income on investment whose use is limited by the board for capital improvements, P207,000
Contributions restricted by donor for pediatric unit operations, P225,000
Contractual adjustments, P1,328,500
Courtesy allowances/staff discounts, P215,000
Provision for uncollectibles, P341,600
 The net patient revenue is: 9505700

 The total operating revenue-unrestricted is: 10218700
 The total operating revenue unrestricted & restricted is: 10443700
4. An NPE hospital received a donation of medicine from the Good Pharmaceutical Co. on March 15, 2020.
The cost of the medicine to the company was P66,000, and its market value was P110,000. Twenty percent of
the medicine was used by the hospital during the year ended December 31, 2020. On the hospital's statement
of operations for the year ended December 31, 2020, the contribution of medicine would increase operating
revenues by
110000
5. In 2020, World Hospital, received an unrestricted bequest of ordinary shares with a fair value of P50,000.
The testator paid P20,000 for the shares. World should record the bequest to
Increase unrestricted net assets by P50,000
6. Perseverance Hospital, an NPE, signed an agreement with Patience, Inc. to provide medical services to
each of Patience’s 100 employees for P2,000 per month, per employee. During the month of April 2020, only
20 employees availed of the medical services. The premium revenue recognized in April 2020 is:
200000
7. Resilience Hospital, an NPE, had the following transactions during the period:
a. Sales of P480,000 from gift shop and cafeteria
b. Received P80,000 dividends from donated shares whose use is unrestricted.
c. A computer consultant provided free services on the upgrading of Resilience’s information system
which would have been purchase if not donated for P200,000
d. Purchased medicines from Unilove Pharma but was not charged because it was deemed donated to
Resilience.
In Resilience’’s statement of operations, total other revenues is recorded at:
800000
8. An NPE hospital has the following account balances
Revenue from newsstand, P50,000
Amounts charged to patients, P800,000
Interest income, P30,000
Salary expense-nurses, P100,000
Contractual adjustments, P110,000
Undesignated gifts, P80,000
Bad debts, P10,000
The hospital’s net patient service revenue is: 690000
9.Care Hospital, an NPE, had the following receipts during the year.
Net patient revenues, P1,000,000
Premium revenue, P200,000
Sales from canteen, P300,000
Investment income, P50,000
Contributions to be used in renovating the hospital, P400,000
The reported total revenues in the revenues section of the statement of operations is: 1550000
10. Under Clever Hospital’s established structure, it would have earned patient service revenue of P9,000,000
for the year ended December 31, 2020. However, P6,750,000 was collected because of charity allowances of
P1,500,000 and discounts of P750,000 to third party payors. The amount that Clever should record as net
patient revenue for the year ended December 31, 2020 is:
6750000
11. An NPE hospital receive the following restricted contributions and other receipts during the year ended
December 31, 2020.
a. for research, P300,000
b. for equipment acquisition, P200,000
c. Income from endowment to be used for new addition to hospital plant, P1,000,000
None of the contributions or other receipts were expended during the year ended December 31, 2020.
 For the year ended December 31, 2020, the amount that would be reported on the hospital’s
statement of changes in net assets as an increase in temporarily restricted net assets is: 1500000
 Assuming the P200,000 was expended to purchase a state-of-the-art x-ray machine, for the year
ended December 31, 2020, the amount that would reported on the hospital’s statement of changes
in net assets as an increase in temporarily restricted net assets is: 1300000
12. Brave Hospital, an NPE had the following receipts during the year:
Billings to patients, P4,800,000
Sales from canteen, P1,000,000
Billings on capitation agreements, P240,000
Uncollectible accounts, P400,000
Salaries of doctors, P1,400,000
The net patient revenue is: 3600000
13. Under Diligent Hospital’s established rate structure, the hospital would have earned patient service
revenue of P5,000,000 for the year ended December 31, 2020. However, Diligent did not expect to collect this
amount because of contractual adjustments of P500,000 to third payors. In May 2020, Diligent purchased
medical supplies from Happy Pharmacy at a cost of P1,000. However, Happy considered the P1,000 as
donation to Diligent. On December 31, 2020, Diligent has board-designated assets of P40,000 cash and
P700,000 investments.
 Diligent should report net patience revenue for the year ended December 31, 2020 in the amount
of: 4500000
 Diligent should report board-designated assets in unrestricted assets in the amount of: 740000
14. Justice Hospital, an NPE, has the following plant and equipment (net of depreciation):
a. Land, P500,000
b. Building, P10,000,000
c. Movable equipment, P2,000,000
Justice should report restricted assets at an amount of: 0

15. Under Savior Hospital’s established rate structure, the hospital would have earned patient service revenue
of P7,000,000 for the year ended December 31, 2020. However, it did not expect to collect this amount
because of charity allowances of P1,000,000 and discounts of P500,000 to third party payors. In May 2020,
Savior purchased bandages from Mercury Drug at a cost of P5,000. However, Mercury notified savior that the
invoice was being cancelled and that the bandages were donated to Savior. The patient service revenue that
Savior will record for the year ended December 31, 2020 is:
6000000
16. Hope Hospital, an NPE, had the following transactions during the period:
b. Received P20,000 dividends from donated shares. The use of dividends is unrestricted.
c. A computer consultant upgraded Hope’s information system for free. Hope would have paid P50,000
for those services if they had not been donated.
d. Received donations of medicines worth P10,000 from a pharmaceutical company.
The total other revenues to be presented in Hope’s statement of operations for the period is: 200000
17. The following information relate to Courage Hospital, an NPE. Answer the questions that follow.
 The net patience revenue is: 289000

 The total operating revenue is: 344000
 The total operating expenses is: 330000
 The income from operations is: 14000
 The total non-operating income-unrestricted is: 57000
 The change in net assets-unrestricted is: 71000
 The net assets-unrestricted, ending is: 109000
 The net assets-temporarily restricted, ending is: 38000
 The total assets is: 450000
 The total net assets is: 397000
ACCOUNTING FOR NPES - COLLEGES AND UNIVERSITIES
1. Where should an alumnus contribution of P50,000 to pay for scholarships for international study be
accounted for?
Current restricted fund
2. Which of the following is not an example of general and educational expenses recorded by a college or
university?
Purchase of sweatshirts for sale in the college bookstore
3. A collection of first editions is donated to Southern Luzon State University for its library. Which is the correct
credit?
No entry is required
4. Calbayog Institute of Science and Technology, an NPE, as of June 30, 2020, and for the year ended:
I. Unrestricted net assets comprised P7,500,000 of assets and P4,500,000 of liabilities (including deferred
revenues of P15,000). Among the receipts recorded during the year were unrestricted gifts of P550,000 and
restricted grants totaling P330,000, of which P220,000 was expended during the year for current operations
and P110,000 remained unexpended at the close of the year.
II. Volunteers from the surrounding communities regularly contribute their service to the school and paid
nominal amounts to cover their travel costs. During the year, travel costs reimbursed to volunteers aggregated
to P18,000. The gross value of services performed by the volunteers and determined by reference to
equivalent wages available in that area for similar services amounted to P200,000. The school normally
purchases these types of contributed services, and it believes that these services enhance its assets.
At June 30, 2020, the school’s unrestricted net assets balance was
P3,000,000
For the year ended June 30, 2020, what amount should be included in the school’s revenue for the
unrestricted gifts and restricted grants?
P880,000
6. Endowment income was restricted to student aid activities. Cash is paid for all activities. Which is the credit
necessary for classification?
Reclassification in-temporarily restricted, satisfaction of program restrictions
7. What is the basis of accounting used in accounting for NPE college or university?
Accrual basis
8. For the summer session of 2020, Ateneo de Manila University assessed its students P1,700,000 (net of
refunds) covering tuition and fees for educational and general purposes. However, only P1,500,000 was
expected to be realized because scholarships totaling P150,000 had been granted to students for which
services are rendered, and tuition remissions of P50,000 had been allowed to faculty members’ children
attending Ateneo. How much should Ateneo report for the summer session ended 2020 as net revenue
from tuition and fees?
P1,650,000
9. Unrestricted current funds of Malayan University designated by the governing board for a specific future
purpose should be reported as part of
10. An alumni donates P10,000 to University of the Philippines for a new Women’s Studies program. The
alumni wants the principal to remain intact but the investment earnings can be used to support the Women’s
Studies program. This donation would be accounted for in the:
Endowment fund
11. The Divine Word College issues long-term debt to build a bridge over the gap between two main
campuses. The debt would be accounted for in the
Investment in plant
12. An NPE college received an offer from an engineer, an alumnus, to teach Engineering Math for one
semester at no cost. This contribution of service
Should be recorded as a revenue with an equivalent amount recorded as an expenditure
expected to be realized because scholarships totaling P150,000 had been granted to students for which no
attending Ateneo. What amount should Ateneo include as net revenues from student tuition and fees?
P1,500,000
14. NPE college or university student unions, dormitories, and residence halls are considered
Auxiliary enterprises
15. Unexpended plant fund accounts for:
Assets allotted for future plant acquisition
16. A university’s long-term boards issued to build dormitories would be recorded in the
Investment in plant fund
17. The quasi-endowment fund of St. Augustine University would account funds set aside by
The governing board of the university for future purpose
18. Catarman University has the following information:

On December 31, 2020, the total liabilities amounted to:
P1,130,000
19. A life income fund is used when
All income earned on donated assets are to be paid to the donor for his/her lifetime
On December 31, 2020, the total assets amounted to:
P5,365,000
21. For the 1st semester of 2020, DLSU-D assessed its students P4,000,000 (net of refunds), covering tuition
and fees for educational and general purposes. However, only P3,700,000 was expected to be realized
because tuition remissions of P80,000 were allowed to faculty members’ children attending DLSU-D, and
scholarships with services rendered to the university totaling P220,000 were granted to students. What
amount should DLSU-D include in net revenue from student tuition and fees for the first semester
ended 2020?
P3,920,000
22. Which plant fund subgroup would consider the following transaction. A bond principal payment is made on
a bond that was issued with the proceeds being designated for construction of a new gymnasium?
Plant fund for retirement of indebtedness
attending Ateneo. The increase in unrestricted net assets for the summer session ended 2020 amounted
to
P1,500,000
24. Private grants which are essentially pass through financial aid to students are accounted for as
Agency transactions
25. For San Sebastian College-Recoletos, the receipt for operating activities that have external restrictions as
to the purpose for which they can be used is recorded by crediting:
Contribution Revenue
26. The loan fund of Pangasinan State University would account for loans
To university students
27. Which of the following is not an example of general and educational revenues of an NPE college or
university?
Room and board fees received by the dormitory
28. In an NPE university, government grants given directly to students are an example of
scholarships with services rendered to the university totaling P220,000 were granted to students. What amount
should DLSU-D include in educational and general current funds or gross revenues (net of refunds) from
student tuition and fees?
P4,000,000
30. Cebu Central University budget funds for the maintenance and repair of its building. These funds would be
accounted for under
Plant fund for renewals and replacements
31. The Board of Trustees decides to set aside P5,000,000 to consider purchasing additional land on the first
month of the next fiscal year. What type of transfer is this?
Discretionary
32. CALEB decides to contribute P1,000,000 to his alma mater. Southwestern Samar College agrees to pay
CALEB a fixed amount every month for the next 20 years in exchange for the donation. CALEB’s donation
would be accounted for in the
Annuity fund
33. Which of the following is not correct?
Expenses denote outlay of resources
34. Which of the following is not an example of the major categories of funds for an NPE college or university?
Proprietary funds
35. Which of the following receipts should be recorded in the restricted current fund of an NPE university?
A cash donation to provide scholarships
36. Which of the following funds of an NPE university makes periodic payments of a fixed amount at equal
intervals
Annuity fund
37. In accounting for loan funds, revenue is recorded when the
Contribution is received
38. The type of endowment fund for which the principal may be expended after the occurrence of an event
specified by the donor is a/an
None of these
39. Which university fund is most similar to the governmental general fund?
Current-unrestricted
40. In a university, class cancellation refunds of tuition and fees should be recorded as
I. Reduction of revenue from tuition and fees.
II. Reduction of accounts receivable
I only
41. The following funds were among those on Holy Spirit University’s books at December 31, 2020:
 Funds to be used for acquisition of additional property for university purposes (unexpended at
12/31/2020) – P3,000,000
 Funds set aside for debt service charges and for the retirement of indebtedness on university’s property
– P7,000,000
P10,000,000
42. All of the following are plant funds in colleges and universities except:
Plant replacement and expansion fund
43. An alumnus made a donation of an adjoining land to a university. The university would record the gift as
An unrestricted revenue
44. Admissions, counseling, and registration are considered to be:
Student services
For the year ended June 30, 2020, what amount should the school record as contribution revenue from the
volunteers’ services?
P200,000
46. Which of the following is an example of an inter-fund transaction?
Cash is set aside for payment of a mortgage
What amount of total revenue from the above-mentioned transactions would be recognized as
revenues?
P970,000
48. Any restrictions on gifts, grants, or bequests received by NPE university are imposed by
Donors
50. Which of the following is a mandatory transfer by Ateneo de Naga University?
Principal and interest payments on long-term debt
DRILL 1 - NPE
1. A(n) conditional promise to give is not a contribution
2. Term endowments would be classified as temporarily restricted contributions.
3. Contributed services are recognized if they create or enhance nonfinancial assets or require
specialized skills.
4. Contributions of monetary and nonmonetary assets are valued at their fair value.
5. The statement of cash flows may be prepared using the direct method (the preferred method) or the
indirect method.
6. Contributions that create endowments are permanently restricted contributions.
7. A promise to give is a contribution if the promise is unconditional.
8. Promises with future payment dates would usually be classified as temporarily restricted
contributions.
9. Contributed works of art, historical treasures, and similar assets are called collection items.
10. The three categories which contributions are to be reported are unrestricted, temporarily restricted,
and permanently restricted.
11. Contributions are unconditional transfers of cash or other assets.
12. In general, contributions are recognized when received.
13. The statement of activities may be in columnar format or in layered format.
14. All expenses are shown in the unrestricted category in the statement of activities.
15. In general, revenues and expenses are reported at their gross amounts.
16. A transfer in which value is not received or given in exchange is a(n) nonreciprocal transfer.
17. Private NPOs must issue financial statements that focus on the NPO as a whole.
DRILL 2 – NPE
1. Repairs made to a building on a volunteer basis by a plumber would not be recognized in the financial
statements
FALSE
2. Revenues from special events that are ongoing and major activities are reported net of related
expenses
FALSE
3. The statement of financial position must show total amounts for each classification of net assets.
TRUE
4. Gifts in kind do not qualify as recognizable contributions
FALSE
5. Contributions that create term endowments are classified as increasing temporarily restricted net
assets
TRUE
6. An unconditional promise to give must be in writing to qualify as a recognizable contribution.
FALSE
7. Collection items need not be depreciated.
TRUE
8. Fund accounting for internal record-keeping is specifically discouraged.
FALSE
9. Assets transferred to a NPE where it has little or no discretion over their use may be accounted for as
temporarily restricted.
FALSE
10. Net assets with board-imposed restrictions are classified as temporarily restricted until conditions are
met.
FALSE
11. Board-restricted net assets must be shown separately in the statement of financial position
FALSE
12. Contributed services are valued using the minimum wage.
FALSE
13. All expenses are reported in the unrestricted category, even expenses incurred in satisfying donor-
imposed restrictions.
TRUE
14. Contributed services are recognized only if they create or enhance nonfinancial assets
FALSE
15. Income earned on endowments (other than term endowment) is reported as increasing permanently
restricted assets
FALSE
16. A purpose restriction is deemed to have expired when an expense has been incurred for that purpose.
TRUE
17. Contributions that create endowments are always reported in the statement of activities and not as
adjustments to equity.
TRUE
18. The statement of financial position must show total assets, total liabilities, and total net assets.
TRUE
19. Contributions with future payment dates usually would be classified as increasing temporarily restricted
net assets
TRUE
20. Collections items need not be capitalized under certain circumstances.
TRUE
21. Expiration of restrictions must be reported separately in the statement of activities
TRUE
22. Contributions received are measured at fair value.
TRUE
23. Private NPOs must present financial statements that focus on the NPO as a whole.
TRUE
24. Conditional promises to give are considered unconditional if the probability that the specified future
event will occur is remote.
FALSE
25. Unconditional promises to give are recognized in the financial statements when received not when
collected.
TRUE
26. Gains and losses on investments are always treated as increases or decreases in unrestricted net
assets
FALSE
27. The definition of contributions does not include conditional promises to give
TRUE
28. Exchange transactions are the main source of revenues for most NPEs
FALSE
29. A communication that is unclear as to whether it constitutes an unconditional promise to give is deemed
an unconditional promise if it is legally enforceable
FALSE
30. The definition of contributions includes both reciprocal and nonreciprocal transfers.
FALSE
DRILL 2: NPE HOSPITAL

1. ABC Hospital, an NPE health care provider, bills P600,000 for services rendered to patients, P500,000 of
which is charged to Philhealth. It is estimated that only P530,000 will be collected. Of the P70,000 difference,
P35,000 represent contractual adjustments with Philhealth, P5,000 for employee discounts, P20,000 for charity
care, and P10,000 for uncollectible accounts. The entry to record the bill of P600,000 includes a
o Credit to patient service revenue, P540,000
o Credit to net patient service revenue, P540,000
2. An NPE hospital agreed to provide medical services to A Co’s 100 employees for P500 per month, per
employee. In April 20x1, only 20 employees availed of the medical services. The entry to record revenue on
April 30, 20xx1 includes a
o Debit to cash, P10,000
o Credit to premium revenue, P50,000
o Debit to accounts receivable, P10,000
3. Hospital premium fees are:

o Only earned to the extent of the services provided
o Charity care services
o Refundable to the subscriber if services are unused
o Revenues earned even if the standard change is above or below the fee
4. Danna makes a cash gift which has no strings attached to an NPE hospital. It is recorded as
o Patient service revenue
o Non-operating revenue-unrestricted
o Other operating revenue-unrestricted
o A direct increase in net assets unrestricted
5. Donated medicines are classified as

o Non-operating revenue
o Other operating revenue
o Premium revenues
6. Which is not a financial statement of an NPE hospital?

o Statement of changes in owner’s equity
o Statement of cash flows
o Statement of operations
o Statement of financial position
7. In accounting for NPE-hospital, what are third-party payors?

o Friends and relatives who pay the medical costs of a patient
o Insurance companies and other groups that pay a significant portion of the medical fees
o Charities that supply medicines to hospitals and other health-care providers
o Doctors who reduce fees for indigent patients
8. A private NPE hospital received a cash contribution of P100,000 from Samantha Hicks on Nov. 14 20x8. Ms.
Hicks specified the money be used to acquire equipment. On Dec 31, 20x8, the hospital had not expended any
of Ms. Hicks’ contribution. On the statement of changes in net assets for the year ended, Dec 31, 20x8, the
hospital should report the contribution as P100,000 increase in
o Deferred revenue
o Fund balance
o Net assets with donor restrictions
o Net assets without donor restrictions
9. This refers to free services rendered to patients

o Subsidy to indigents
o Contractual adjustments
o Charity care
o Premium expense
10. A private NPE hospital charged a patient P8,600 for services. It actually billed this amount to the patient’s
third-party payor. The third-party payor submitted a check for P7,900 with a note stating that “the reasonable
amount is paid in full per contract.” Which of the following statements is true?
o The third-party payor retained the P700 and will convey it to the NPE hospital at the start of the next
fiscal period.
o The NPE hospital recorded the P700 as a contractual adjustment that it will not collect
o The NPE hospital will bill the third-party payor again for the remaining P700
o The patient is responsible to pay the remaining P700
11. A donor-restricted fund of an NPE hospital which may be specific-purpose fund, a term endowment fund, or
a plant replacement and expansion fund
o Permanently restricted fund
o General fund
o Temporarily restricted fund
o Particular fund
12. Gain on sale of a hospital van is classified as

o Miscellaneous revenue
o Incidental revenue
13. A fund restricted by the governing board for acquisition of equipment and construction of the hospital’s
annex is classified as
o Unrestricted
o Momentarily restricted
o Temporarily restricted
o Permanently restricted
14. What is the appropriate account to debit when reducing patient billings caused by arrangements with third-
party payors?
o Allowance for uncollectible and reduced accounts
o Patient service revenues
o Accounts receivable third-party payors
o Accounts receivable-patients
15. An NPE hospital agreed to provide medical services to A Co.’s 100 employees for P500 per month, per
employee. In April 20x1, only 20 employees availed of the medical services. This illustrates
o Third-party payor agreement
o Marketing strategy
o Private partnership
o Capitation agreement
16. Yumilka makes a cash gift to an NPE hospital to be used to buy toys for the pediatric ward. It should be
recorded as
o unrestricted
17. Other Operating Revenues include

o Revenue from radiology services
o Revenues from nursing services for post-operative care
o Revenues from outpatient surgery
o Revenue from educational programs
18. Hospital courtesy allowances are

o Revenue deductions
o Expenses
o Revenue earned if the standard charge is above or below the allowance
care, and P10,000 for uncollectible accounts. How much is the net patient service revenue?
o P545,000
o P540,000
o P565,000
o P600,000
o P560,000
o P575,000
care, and P10,000 for uncollectible accounts. The entry to record the contractual adjustments includes a
o Debit to third-party payor expense, P35,000
o Debit to net patient service revenue, P35,000
o Debit to agreements expense, P35,000
o Debit to contractual adjustments, P35,000
LONG PROBLEM – DAYAG COLLEGE
The preclosing trial balance of Dayag College of Business and the Arts shows the following balances:
1. In the statement of activities, unrestricted column, net assets at the end of the year is 395000 (please do not
use peso sign, comma, or decimal)
2. In the statement of activities, temporarily restricted column, total revenues and gains excluding other support
is 240000 (please do not use peso sign, comma, or decimal)
3. In the statement of activities, unrestricted column, decrease in net assets is 280000 (please do not use peso
sign, comma, or decimal)
4. In the statement of activities, total unrestricted, temporarily restricted, and permanently restricted revenues
and gains excluding other support is 4055000 (please do not use peso sign, comma, or decimal)
5. In the statement of activities, total expenses (expenditures) and losses (other deduction) is 3970000 (please
do not use peso sign, comma, or decimal)
6. In the statement of activities, permanently restricted column, net assets at the end of the year is 3000000
(please do not use peso sign, comma, or decimal)
7. In the statement of activities, temporarily restricted column, decrease in net assets is 135000 (please do not
8. In the statement of activities, net assets (restricted and unrestricted) at the end of the year is 4235000
9. In the statement of activities, unrestricted column, total revenues and gains excluding other support is
3315000 (please do not use peso sign, comma, or decimal)
10. In the statement of activities, unrestricted column, total revenues and gains and other other support is
11. In the statement of activities, permanently restricted column, total revenues and gains excluding other
support is 500000 (please do not use peso sign, comma, or decimal)
12. In the statement of activities, temporarily restricted column, net assets at the end of the year is 840000
13. In the statement of activities, permanently restricted column, increase in net assets is 500000 (please do
not use peso sign, comma, or decimal)
14. In the statement of activities, total net assets released from restrictions is 375000 (please do not use peso
15. In the statement of activities, total (unrestricted and restricted) revenues and gains excluding other support
NEW QUESTIONS
On December 31, 20x1, ABC Organization, a not-for-profit entity, received the following donations:
 Ms. Alpha made a pledge (promise) to give P12,000 to ABC Organization each year for the next five
years starting on December 31, 20x2. The appropriate discount rate is 10%. The pledge is
unconditional.
 Ms. Beta made a pledge (promise) to provide half of the needed funds to construct a new building for
ABC Organization if ABC could get the remaining half of the funds needed from other donors by March
1, 20x2. As of December 31, 20x1, ABC has already accumulated 47% of the needed construction
funds from donations and ABC’s Board of Trustees strongly believes that the remaining 3% will be
received by the end of January 20x2. The estimated total costs of construction is P1,000,000.
 Mr. Charlie made a pledge (promise) to give ABC Organization a used offset printing equipment if ABC
acquires a paper cutting equipment. The offset printing equipment has a fair value of P1,200,000.
Because of recent cash flow problems, ABC’s Board of Trustees believes that it will not be able to
acquire a paper cutting equipment in the near term.
 Mr. Delta gave ABC Organization P500,000 as a challenge grant. ABC Organization can keep the
P500,000 if it can raise an additional P500,000 by the end of March 20x2. If ABC Organization fails to
comply with the condition, it shall return the amount received to Mr. Delta.
1. The entry to record the promise of Ms. Alpha includes a credit to
Contributions revenue – temporarily restricted support
2. The entry to record the promise of Mr. Charlie includes a credit to

Contributions revenue – unrestricted support
Liability for refundable advance
None of these
3. The entry to record the promise of Mr. Delta includes a credit to
4. The entry to record the promise of Ms. Beta includes a credit to

-----------------------
True
-----------------------
ABC Hospital, an NPE health care provider, bills P600,000 for services rendered to patients, P500,000
of which is charged to Philhealth. It is estimated that only P530,000 will be collected. Of the P70,000
difference, P35,000 represent contractual adjustments with Philhealth, P5,000 for employee discounts,
P20,000 for charity care, and P10,000 for uncollectible accounts.
6. The entry to record the contractual adjustments includes a
Debit to Contractual Adjustments, P35,000
7. The entry to record the bill of P600,000 includes a

Credit to Patient Service Revenue, P600,000
-----------------------
temporarily restricted contributions.
False
An NPO disclosed the following in its 20x1 notes to financial statements:
operations. (permanently)
b. Net resources of P1,000,000 invested in plant assets. (unrestricted)
children’s playground. (temporarily)
d. Board-designated funds of P600,000. (unrestricted)
e. Received P20,000 cash from a donor who did not specify any use restrictions on the contribution
however, the donor specified that the donation should not be used until 20x2. (temporarily)
f. Received P800,000 (permanently) from a donor who stipulated that the contribution shall be invested
indefinitely and that the earnings shall be used for research purposes. Investment income in 20x1
amounted to P50,000. (temporarily)
9. The amount included in temporarily restricted net assets is:
5070000
10. The amount included in permanently restricted net assets is:
2800000
11. The amount included in unrestricted net assets is:
1600000
-----------------------
True
13. On the statement of operations of a health care organization, expenses are deducted from
Unrestricted revenues
14. On July 31, 2020, Valenzuela College, an NPE, showed the following amount to be used:
Renewal and replacement of college properties 200,000
Retirement of indebtedness on college properties 300,000
Purchase of physical properties for college purposes, but unexpended at July 31, 2020 400,000
The total amount that should be included in Valenzuela’s plant funds at July 31, 2020 is:
900000
15. A private NPE hospital received a cash contribution of P100,000 form Samantha Hicks on Nov. 14,
20x8. Ms. Hicks specified the money be used to acquire equipment. On Dec. 31, 20x8, the hospital had
not expended any of Ms. Hicks’ contribution. On the statement of changes in net assets for the year
ended, Dec. 31, 20x8, the hospital should report the contribution as a P100,000 increase in
Net assets with donor restrictions

Statement of Changes in Owner’s Equity
17. The financial statements of a not-for-profit entity should focus on the
Basic information on the organization as a whole
18. This refers to free services rendered to patients.
Charity care
19. ABC Organization, a not-for-profit entity, received the following donations during 20x1:
 Land with a fair value of P10,000,000 to be sold to acquire a bus.
 Shares of stocks with fair value of P3,000,000 to be retained indefinitely. The dividends from the
As a result of the donations above, ABC should report as increase in temporarily restricted net assets
an amount equal to:
10000000
20. In 2020, Bautista Hospital, an NPE, received P250,000 pure endowment grant. Also in the same year,
Bautista’s governing board designated for special purposes, P300,000 which had originated form
unrestricted gifts.
The amount that should be accounted for as part of the unrestricted net asset class is:
300000
Insurance companies and other groups that pay a significant portion of the medical fees
Revlove Organizations, an NPE, receive the following donations during 20x1:
 Land with fair value of P40,000,000 to be sold to acquire a bus.

As a result of these donations, Revlove should report an increase in temporarily restricted net assets
in the amount of:
40000000
net assets.
True
False
25. Contributed services are recognized only if they create or enhance nonfinancial assets/
False
26. A donor-restricted fund of an NPE hospital which may be a specific-purpose fund, a term endowment
fund, or a plant replacement and expansion fund.
Temporarily restricted fund
assets.
True
Revenue deductions
29. An NPO received the following contributions in 20x1

 P100,000 cash for the purchase of equipment.
 P250,000 cash restricted for the renovation of an old building owned by the NPO.
None of the contributions were used in 20x1. However, in 20x2, the entity acquired an equipment for
P110,000.
The contributions revenue recognized in 20x1 is 350000.
30. General purpose external financial reporting by a health care organization requires presentation of
Statement of operation
31. In June 2020, Gatdula Hospital, an NPE, purchased medicines from Camutin Pharmaceutical Co. at a
cost of P2,000. However, Camutin Pharmaceutical Co. notified Gatdula Hospital that the invoice was
being canceled, and the medicines were being donated to Gatdula. Gatdula should record this donation
of medicine as
Other operating revenue of P2,000
True
33. On December 1, 20x1, ABC Organization, a non-profit entity, had the following transactions:
 Purchased a vehicle costing P150,000 using unrestricted cash
 Received a vehicle with fair value of P120,000 from donation
ABC estimates that both of the vehicles have useful lives of 5 years and no residual value. ABC has an
accounting policy implying a time restriction on gifts of long-lived assets.
In ABC’s 20x1 statement of activities, the amount of depreciation expense that should be included
under changes in unrestricted net assets is 4500
34. Medina Hospital, an NPE, would have earned patient service revenue of P9,000,000 for the year
ended, December 31, 2020. However, only P6,750,000 was collected because of charity care services
of P1,5000,000 and discounts of P750,000 to third-party payors.
For the year ended December 31, 2020, Medina Hospital should record patient service revenues of
7500000.

Non-operating revenue
True
False
Unrestricted
P110,000.
The net assets released from restrictions reported in the 20x2 statement of activities is 100000.

True
41. On the statement of activities of a private university, expenses are reported by
Function
42. An unconditional promise to give must be in writing to qualify as a recognizable contributions.
False
True
44. A private NPE hospital charged a patient P8,600 for services. It actually billed this amount to the
patient's third-party payor. The third-party payor submitted a check for P7,900 with a note stating that
"the reasonable amount is paid in full per contract." Which of the following statements is true?
The NPE hospital recorded the P700 as a contractual adjustment that it will not collect.
45. The following funds were among those held by Calahati College, an NPE, at December 31, 2020:
Principal specified by the donor as nonexpendable P500,000
Principal expendable after the year 2025 300,000
Principal designated from current funds 100,000
The amount that Calahati College should classify as regular endowment fund is 500000.
46. ABC Organization, a non-profit entity, acquired shares of stocks to be held as investment for P200,000
using unrestricted net assets. During the year, ABC received cash dividends of P10,000. At year-end,
the shares have a fair value of P220,000.
The effect of the transactions described above on the year-end statement of activities of ABC amount
to 30000.
47. Which of the following statements related to pledges is incorrect?
Pledges are generally enforceable contracts
48. The definition of contributions does not include conditional promises to give.
True
50. The machine of ABC Organization, a not-for-profit entity, has malfunctioned. Mang Tony, a professional
mechanic, repaired the machine for free. The fair value of the services is estimated at P10,000. Which
of the following statements is correct?
This event has a zero net effect on ABC’s net assets
recorded as
52. A non-profit organization receives donation of services in-kind from an accountant who was consulted
regarding the NPO’s financial reporting system. The NPO will most likely recognize those services as
Expenses and revenues
assets.
False
54. When the donor has specified a particular date or event after which the principal of the Endowment
fund may be expended, the Endowment Fund is referred to as a(an)
Term endowment fund
55. An NPE college’s unrestricted current fund comprised the following.
Asset 5,000,000
Liabilities (including deferred revenues of P100,000) 3,000,000
The fund balance of the NPE college’s unrestricted fund is 2000000
56. Board-designated funds should be accounted for as
Unrestricted funds
57. The following expenditures were among those incurred by Barrientos university an NPE during 2020
Administrative data processing P50,000
Scholarship and fellowship P100,000
Operation and maintenance of physical plant P200,000
The amount to be included in the functional classification “institutional support” expenditures account
is 50000
58. Private not-for-profit organizations should report a statement of cash flows using the
Either direct or indirect method
59. Collection items need not be capitalized under certain circumstances.
True
QUIZ – OTHER NPES
1. Chelsea does volunteer work for a local not-for-profit organization as a community service. She
replaces without charge an administrator who would have otherwise been paid P31,000. Which of the
following statements is true?
The organization should recognize public support of P31,000 as an increase in unrestricted
assets
Golden Path, a labor union, has the following receipts and expenses for the year ended, December 31,
2020.
Receipts:
Per capita dues 900,000
Initiation fees 120,000
Sales of organization supplies 80,000
Nonexpendable gift restricted by donor 50,000
for loan purposes for 10 years
Nonexpendable gift restricted by donor 60,000
for loan purposes in perpetuity
Expenses:
Labor negotiations 720,000
Fund-raising 150,000
Membership development 40,000
Administrative and general 250,000
The union constitution provides that 12% of the per capita dues be designated for the strike insurance
fund to be distributed for strike relief at the discretion of the union’s executive board.
2. In Golden Path’s statement of activities for the year ended December 31, 2020, the amount that should
be reported under the classification of revenue from unrestricted funds is ___________. 1100000
be reported under the classification of restricted net assets is ___________. 110000
be reported under the classification of supporting services is ___________.440000
be reported under the classification of program services is ___________.720000
On January 2, 2020, an NPE botanical society received a gift of an inexhaustible fixed asset with an
estimated useful life of 10 years and no salvage value. The donor’s cost of this asset was P20,000 and
its fair value at the date of the gift was P30,000
6. The amount of depreciation of this asset that the society should recognize in its 2020 financial
statements is _______ 0
On January 2, 2020, an NPE botanical society received a gift of an exhaustible fixed asset with an
estimated useful life of 10 years and no salvage value. The donor’s cost of this asset was P20,000 and
its fair value at the date of the gift was P30,000
7. The amount of depreciation of this asset that the society should recognize in its 2020 financial
statement is ___ 3000
8. The following expenditures were among those incurred by an NPE botanical society during 2020:
Printing of annual report 15,000
Unsolicited merchandise sent to encourage contributions 35,000
The amount that should be classified as fund-raising costs in the society’s statement of activities is
____________.
35000
9. An NPE receives two gifts. One is P80,000 and is restricted for paying salaries of teachers who help
children learn to read. The other is P110,000, which is restricted for purchasing playground equipment.
The organization spends both amount properly at the end of this year. The organization records no
depreciation this period and it has elected to view the equipment as having a time restriction. On the
statement of activities, what is reported for unrestricted net assets?
An increase of P80,000 and a decrease of P80,000
10. Contribution of a work of art in a museum for public exhibit would

Not be recognized as a contribution
11. On May 5, 2020, a donor contributed an equity security having a P500,000 fair value. The donor
stipulated that, (a) the NPE may sell the equity security and make other suitable in investments, (b) the
P500,000 must remain intact in perpetuity, and (c) the income and gains may be spent only on diabetes
research (no mention is made regarding the treatment of losses). The equity security had a fair value of
P530,000 at December 31, 2020. No dividends were received in 2020. Which of the following
categories of net assets is affected at December 31, 2020?
Increase temporarily restricted net assets by P30,000
12. In July 2020, Anthony donated P200,000 cash to a church with a stipulation that the revenue generated
from this gift be paid to him during his lifetime. The conditions of this donation are that after Anthony
dies, the principal may be used by the church for any purpose voted on by the church elders. The
church received interest of P16,000 which was remitted to Anthony in the church’s June 30, 2021
annual financial statements:
P200,000 should be reported as temporarily restricted net assets in the statement of financial
position and P216,000 should be reported as revenue in the statement of activities
13. The entry in the books of an NPE local ballet company to record receipt of a cash gift which is
designated by the donor to buy costumes for a new ballet staging includes a
Credit to Revenue-temporarily restricted contribution
14. To send a mailing, a private NPE charity spends P100,000. The mailing solicits donations and provides
educational and other information about the charity. Which of the following is true?
Under certain specified circumstances, the organization should allocate a portion of the
P100,000 to program service expenses.
15. Green trees, a community foundation, incurred P5,000 expenses during 2020 putting on its annual
fund-raising talent show. In the statement of activities, the P5,000 should be reported as
Part of fund-raising costs
The following gifts are received in Year 1 by an NPE
I P2,000 specified by the donor to be used to pay salaries
II P10,000 for the new conference room furniture
III P5,000 to be held for one year before being expended
16. The increase in temporarily restricted net assets in Year 1 is _____. 7000
17. The amount to be reclassified on the statement of activities in year 2 from temporarily restricted column
is _____ 7000
18. In 2020, the board of trustees of Estimada foundation designated P100,000 from its current funds to
college scholarships. Also in the same year, the foundation received P200,000 from an estate of a
benefactor who specified that the bequest was to be used for hiring teachers to tutor handicapped
students.
The amount to be accounted for as temporarily restricted fund is _____. 200000
19. The entry in the books of an NPE to record pledges of P100,000 with an estimated 5% uncollectible,
includes a
Credit to unrestricted net assets-contribution of P95,000
20. In 2021, an NPE trade association enrolled five new member companies each of which was obligated to
pay nonrefundable fees of P1,000. These fees were receivable by the association in 202. Three of the
new members paid the initiation fees in 2021 and the others received by the association from all other
members have always covered the organization’s cost of services provided to its members. It can be
reasonably expected that future dues will cover all costs of the organization’s future services to
members. Average membership duration is ten years because of margins, attrition and economic
factors.
The amount of initiation fees from the five new members that should be recognized as revenue by the
association is____ 5000
Cute Paws organization, an NPE had the following cash flows during the year
a. P200,000 unrestricted contributions
b. P2.4M from fund-raising activities to support current operations
c. P400,000 from a donor who stipulated that the money be sent in accordance with the wishes of Cute
Paws governing board
d. P800,000 cash dividends restricted for the purchase of equipment
e. P800,000 expenditure to acquire equipment with cash dividends in (d)
f. P1.2M from a donor who stipulated that the contribution be invested indefinitely, income from the
contribution may be used in furtherance of Brownie’s mission
21. The net cash flows from operating activities is 3000000
22. The net cash flow from financing activities is 2000000
23. The net cash flow from investing activities is (800000)
24. Which account would be credited in recording a gift of medicine to a nursing home from an outside
party?
Other revenues-donations
25. Other NPEs provide three financial statements. Which of the following is not one of them?
Statement of functional expenses
26. A big corporation makes a donation of P10M to the local art museum foundation for the construction of
a new art museum provided the community can match the P10M with other donations. This is an
example of a/an
Conditional pledge
27. Leerick foundation received a nonexpendable endowment of P500,000 in 2020 from Von enterprises.
The endowment assets were invested in publicly traded securities von did not specify how gains and
losses from the dispositions endowment were to be treated. No restrictions were placed on the use of
the dividends received and interest earned on fund resources in 2021. Leerick realized gains of
P100,000 on sales of fund investments and received a total interest and dividend of P50,000 on fund
securities.
The amount of these capital gains interest and dividends available for expenditures by Leerick’s
unrestricted current fund is ___. 50000
28. Reporting requirements of other NPEs similar to those of which of the following entities?
A VHWO
29. QQ museum is a private NPE if it received a contribution of historical artifacts it need not recognize the
contribution if the artifacts are to be sold and it will use the proceed to
Acquire other items for collections
30. The Lopez family lost its home in a fire on December 25, 2020 a philanthropist sent money to AB
society an NPE specifically to purchase furniture for the Lopez family During January 2021 AB
purchased furniture for the Lopez family how should AB report the receipt of the money in its 2020
financial statement?
As a liability
YELLOW - CORRECT ANSWER
RED - WRONG ANSWER
CYAN – SUGGESTED ANSWER
QUIZ - ACCOUNTING FOR VHWO

1. A VHWO has the following expenditures:
How should the organization report these items?
Program service expenses of P100,000 and supporting services expenses of P160,000.
2. A donation of materials to be used in providing services was received by a VHWO. How should these
donated materials be recorded?
As inventory
3. Military Family Center is a VHWO funded by contributions from the general public. During 2020,
unrestricted pledges of P800,000 were received, half of which is payable in 2020 with the other half
payable in 2021 for use in 2021. It was estimated that 10% of these pledges would be uncollectible.
How much should Military Family Center report as net contribution revenues in 2020 with respect to
the pledges?
720000
4. Bell Foundation, a VHWO supported by contributions from the general public, included the following
costs in its statement of functional expenses for the year ended December 31, 2020.
Fund raising - P1,000,000
Administrative - 600,000
Research - 200,000
Bell’s functional expenses for 2020 program services included
200000
5. A good reason for a VHWO to adopt fund accounting even though standards do not require it is
because:
The program services involve more than one type of revenue

6. A VHWO sends a mailing to all of its members including those who have donated in the past and others
who have not donated. The mailing which costs P22,000 asks for monetary contributions to help
achieve the organization’s mission. In addition, 80% of the materials included in the mailing is
educational in nature. Which of the following is true?
No part of the P22,000 should be reported as a program service cost because there is no
specific call to action.
7. Greg takes a leave of absence from his job to work full-time for a VHWO for six months. He fills the
position of finance director, a position that normally pays P88,000 per year. He accepts no
remuneration for his work. How should these donated services be recorded?
As public support of P44,000 and an expense of P44,000
8. A VHWO received unrestricted cash donations of P20,000 from donors who attended a dinner held for
the benefit of the organization. These costs of the dinner, including room rental, and other expenses,
amounted to P7,000. On the statement of activities prepared by the VHWO, the expenses of the dinner
should be
Reported as fund-raising costs
9. A donation was received by a VHWO specifically to care for indigent patients. Which of the following
should be used to record the gift?
Public support - temporarily restricted contributions
10. What is the proper method of carrying investments of a VHWO?
Market value measured at year-end
11. Public support for a VHWO includes:
Legacies and bequests
12. Which of the following organizations would be classified as a VHWO?
The Sierra Madre Foundation, an environmental organization
13. In the absence of donor stipulations, revenues derived from an environment would be reported in the
statement of activities of a VHWO as increases in:
14. Which of the following expenses would be considered a program service expense for a local cancer
society?
Salary of a home care nurse

15. A contribution in 20x9 to a VHWO, which is restricted to usage to celebrate the millennium in the year
20x0, is recorded as a credit to:
Revenue - permanently restricted
16. A VHWO receives a gift of new furniture having a fair value of P2,100. The group then gives the
furniture to needy families following a flood. How should the organization record the receipt and
distribution of this donation?
Record public support of P2,100 and community assistance expense of P2,100
17. A VHWO receives P32,000 in cash from solicitations made in the local community. The organization
receives an additional P1,500 from members in payment of annual dues. Members are assumed to
receive benefits roughly equal in value to the amount of dues paid. How should this money be
recorded?
Public support of P32,000 and revenue of P1,500
18. A VHWO is permitted to use building facilities for free. This should be recorded as:
Both as contribution and rent expense at fair market value
19. A VHWO received P200,000 pledges from donors on Feb 15, 2020. The donors did not place any time
or use restrictions on the amount of pledged. The governing board estimated that 10% of the pledges
would be uncollectible. During the remainder of fiscal year 2020, cash received from pledges amounted
to P184,000. For the year ended June 30, 2020, what amount should the VHWO report as
contributions-unrestricted?
184000
20. A CPA donates her services to prepare the annual financial report of a VHWO. The services should be
recorded as:
Both as revenues-unrestricted and accounting expenses
21. A VHWO received P300,000 contribution on April 15, 2020, from a donor who stipulated that the
donation has to be invested permanently in stocks and bonds. The donor further stipulated that the
earnings from the investment be at the discretion of the governing board of the VHWO. earnings from
the investment for the year ended, June 30, 2020, amounted to P6,000. How would the VHWO report
this information for the year ended June 30, 2020?
Increase in permanently restricted net assets of P300,000, and in unrestricted net assets of
P6,000
22. Which of the following is a VHWO?
Charity raising money for underprivileged children
23. Government grants that are essentially flow-through transactions would be recorded by a VHWO as:
Liability
24. On June 30, 2020, a VHWO received pledges from donors amounting to P50,000. The donors did not
place any time or use restrictions on the amount pledged. However, the donors intended to give the
money three months after making the pledge. It was estimated that 10% of the pledges would not be
collected. How should the VHWO report these pledges on the date the pledge was received?
As contribution revenue - temporarily restricted for P50,000
25. During the fiscal year ended June 30, 2020, Global Charities, a VHWO, received unrestricted cash
contributions of P500,000 and temporarily restricted cash contributions of P300,000. All of the
temporarily restricted contributions were restricted by the donors for equipment acquisition. During the
year ended, June 30, 2020, equipment costing P250,000 was acquired with the restricted contributions.
As a result of these two contributions, Global Charities’ statement of cash flows prepared for the year
ended June 30, 2020, would report an increase in net cash provided by operating activities of
500000
26. Which of the following financial statements is not required when reporting for a VHWO?
Statement of Support, Revenue, Expenses, and Changes in Fund Balances
27. A VHWO developed and printed informational materials which were intended to both educate the public
about how its resources are used to help people in need and to also appeal for much needed support.
In this situation, the cost of informational materials should be:
Allocated between expenses for program services and fund-raising expense
28. A VHWO reports pledges receivable on its statement of financial position at the present value of future
cash collections. How is the increase in present value of the pledges receivable, which is due to the
passage of time, reported on the VHWO’s statement of activities?
As an increase in contributions – temporarily restricted
29. The Philippine Heart Association is having its annual Heart Ball. This is a major annual event of the
organization. Any direct costs of the ball are considered:
Fund-raising expenses
30. Which basis of accounting should a VHWO use?
Accrual basis for all funds

31. On the statement of functional expenses of a VHWO, how are expenses classified?
Program service expenses and supporting service expenses
32. Which of the following items is considered a special event support for a VHWO?
Bingo games and bake sales
33. Which of the following is not a question individuals ask of a VHWO in considering whether to make
contributions?
How much should this organization receive?
34. Catherine Dee is a social worker on the staff of Military Family Center, a VHWO. She earns P42,000
annually for a normal workload of 2,000 hours. During 2020, she contributed an additional 800 hours of
her time to the Military Family Center at no extra charge. How much should Military Family Center
record in 2020 as contributed services expense?
16800
35. On the statement of functional expenses prepared for a VHWO, depreciation expense is allocated to
I. Expenses for program services
II. Expenses for supporting services
Both I and II
36. What is the purpose of a VHWO’s statement of functional expenses?
Separates program service expenses from supporting service expense

A DONOR…
37. A donor agrees to contribute P5,000 per year at the end of each year of the next five years to a VHWO.
The donor did not place any use restrictions on the amount pledged. The stream of payments is
discounted at 6%. The first payment of P5,000 is received at the end of the first year. The present value
factor for a five-payment annuity due on June 30, 2020 at 6% is 4.2124. The increase in present
value of the contributions receivable recognized at the end of the first year is:
1264
factor for a five-payment annuity due on June 30, 2020 at 6% is 4.2124. At the end of the first year, the
pledged increased unrestricted net assets by:
5000
factor for a five-payment annuity due on June 30, 2020 at 6% is 4.2124. The journal entry to
recognize present value at the time the pledge is received includes:
A debit to Pledges Receivable - Temporarily Restricted for P21,062

LOCAL SERVICES
Local Services, a VHWO had the following classes of net assets on July 1, 2020, the beginning of its fiscal
year:
Unrestricted P500,000
Temporarily restricted P100,000
Permanently restricted P1,000,000
During the year ended June 30, 2020, the following events occurred:
1. It purchased equipment costing P100,000, from restricted contributions for this purpose. The
contributions had been received from donors during June 2020.
2. It received P130,000 cash donations which were restricted for research activities. During the year
ended June 30, 2021, P90,000 of the contributions were expended on research.
3. It sold investments classified in the net assets as permanently restricted for a loss of P40,000.
Dividends and interest income earned on the investments amounted to P70,000. There were no
restrictions on how investment income is to be used.
4. It received cash contributions of P200,000 from donors who did not place either time or use
restrictions upon their donations.
5. Expenses, excluding depreciation expense, for program services and supporting services incurred
during the year ended June 30, 2021 was P260,000.
6. Depreciation expense for the year ended June 30, 2021 was P80,000.
40. On the statement of activities for the year ended June 30, 2021, temporarily restricted net assets:
Decreased 60000
41. Reclassifications on the statement of activities for the year ended June 30, 2021 would be:
190000
42. The amount of expenses under unrestricted column of the statement of activities would be:
340000
43. The amount of permanently restricted net assets reported on the statement of financial position
would be:
960000
44. On the statement of activities for the year ended June 30, 2021, reclassifications would be reported
at
190000
TOWN SERVICE CENTER
45. Town Service Center is a VHWO funded by contributions from the general public. During 2020,
unrestricted pledges of P800,000 were received. Half of this was received during 2020 and the
remaining half is promised by the donor to be given the following year. It was estimated that 10% of the
pledges receivable would be uncollectible. In addition, Halley Larson, a social worker on the VHWO
staff with annual earnings of P30,000 for a normal workload of P1,500 hours contributed an additional
600 hours of her time to the VHWO at no charge. How much should Town report as net temporarily
restricted contribution revenue for 2020 with respect to the pledges?
360000
600 hours of her time to the VHWO at no charge. How much should Town report as total unrestricted
contribution revenue for 2020?
412000
600 hours of her time to the VHWO at no charge. How much should Town report as unrestricted
contribution revenue for 2020 with respect to the pledges?
400000
600 hours of her time to the VHWO at no charge. How much should Town report as contribution
service expense in 2020?
12000
STATE CENTER HEALTH AGENCY
49. On January 1, 2020, State Center Health Agency, a VHWO, received a bequest of P200,000 certificate
of deposit maturing on December 31, 2024. The contributor’s only stipulations were that the certificate
be held to maturity and the interest revenue received annually be used to purchase books for the
children to read in the pre-school program run by the agency. Interest revenue each year is P9,000,
and this fully spent for books each year. When the certificate was redeemed, the board of trustee’s
adopted a formal resolution designing P150,000 of the proceeds for future purchase of playground
equipment for the pre-school program. What amount should be reported in 2020 statement of
activities as unrestricted public support or/and revenues?
Transfers from the restricted fund of P9,000
equipment for the pre-school program. What should be reported in the December 31, 2024 statement
of activities for the unrestricted fund?
Transfers from restricted fund of P209,000
equipment for the pre-school program. What should be reported in the December 31, 2024 statement
of financial position for the unrestricted fund?
Board-designated funds, P150,000
equipment for the pre-school program. What would be reflected under temporarily restricted column
of the statement of activities in 2020?
All of these
GOVERNMENT ACCOUNTING
QUIZ 8 – MARCH 27 – GOV’T ACCTG
The Research Institute for Tropical Medicine (RITM) had its humble beginnings soon after the
culmination of over a decade of negotiations between the governments of the Philippines and Japan
for the establishment of a tropical medicine research center. RITM was tasked to plan and implement
research programs for infectious and tropical diseases. Research Institute for Tropical Medicine (RITM)
of national government received the following NCA from DBM for the first quarter of the current year:
Regular Agency Fund P 2,000,000 RITM allocated the NCA on Personnel Services: 1,400,000 less tax of
108,000, Capital Outlay 500,000 less tax of 30,200, and Maintenance and Other Operating Expenses
amounting to 100,000 les tax of 1,800. Office Equipment acquired on January 1, 2018 amounting to
500,000 with a useful life of 10 years. The original building facilities of RITM, which included a
laboratory wing and a 50-bed hospital for patients with infectious diseases requiring tertiary care,
were inaugurated on April 23, 1981 amounting to 15,000,000 with a useful life of 40 years.
Ambulances were acquired on January 1, 2008 amounting to 1,200,000 with a useful life of 15 years.
January 1, 2019. RITM set up petty cash fund amounting to 15,000. January 1, 2019. RITM, then,
issued obligation request and status (ORS) for the purchase of office equipment to be used in its office
area in the amount of P500,000. Accordingly, said amount was obligated. Upon delivery by the
supplier, the agency paid the purchase order, net of P30,200 withholding tax. It has a useful life of 10
years. May 1, 2019, RITM, then, issued obligation request and status (ORS) for the purchase of office
supplies to be used in its research and development project in the amount of P30,000. Accordingly,
said amount was obligated. Upon delivery by the supplier, the agency paid the purchase order, net of
P1,800 withholding tax. Eventually, office supplies amounting to P20,000 were issued based on the
requisition and issue slip. DECEMBER 31, 2019. DATA FROM ACCOUNTING RECORDS OF PETTY CASH
CUSTODIAN: POSTAGE AND COURIER EXPENSES 1,500 FUEL, OIL AND LUBRICANTS EXPENSES 8,500
OTHER MOOE 4,000 TOTAL P14,500 AN EMPLOYEE WAS GRANTED CASH ADVANCE FOR LOCAL TRAVEL
LAST YEAR IN THE AMOUNT OF P3,000. ON JANUARY 2019, UPON RETURN TO THE PERSONNEL’S
WORKSTATION, THE EMPLOYEE PREPARED THE LIQUIDATION REPORT AND SUBMITTED IT TO THE
ACCOUNTING DIVISION WITH APPROPRIATE SUPPORTING DOCUMENTS.ON APRIL 2019, EMPLOYEES
GRANTED CASH ADVANCE FOR FOREIGN TRAVEL IN THE AMOUNT OF P140,000 TO ATTEND FOREIGN
TRAINING IN ORDER TO PREPARE FOR A POSSIBLE PANDEMIC. TRAINING EXPENSE WAS ALLOWED IN
THE AMOUNT OF P50,000. WITHIN A WEEK UPON RETURN TO THE PERSONNEL’S WORKSTATION, THE
EMPLOYEE PREPARED THE LIQUIDATION REPORT AND SUBMITTED IT TO THE ACCOUNTING DIVISION
WITH APPROPRIATE SUPPORTING DOCUMENTS. Every month, RITM granted cash advance to the
cashier for the payroll. Afterwards, the RITM cashier paid the employees through ATM and submitted
the liquidation report of the payroll fund with the corresponding supporting documents. Afterwards,
RITM remitted the withheld tax BIR and the withheld tax contribution to GSIS, PAGIBIG and PhilHealth.
Monthly Payroll Advice: SALARIES AND WAGES P50,000 PERA 20,000 TOTAL 70,000 LESS SALARY
DEDUCTIONS: WITHHOLDING TAX 9,000 GSIS 8,500 GSIS SALARY LOAN 700 PAGIBIG PREMIUMS 1,400
PHILHEALTH PREMIUM 3,800 EMPLOYEES’ ASSOCIATION 200 NET AMOUNT P46, 400 RITM also
remitted the government share amounting to P13,700. RETIREMENT AND LIFE INSURANCE PREMIUM
P8,500 PAG-IBIG CONTRIBUTIONS 1,400 PHILHEALTH CONTRIBUTIONS 3,800 On December 31, 2019
the agency also paid the 13th Month of its employees. RITM also paid recurring monthly utility and
communication bills amounting to P3,175 ELECTRIC BILL P1,475 PLDT BILL 1,100 WATER BILL 600
TOTAL P3,175
Balance Sheet December 31, 2018

Chart of Accounts, Income Statement
How much is the RITM Government Equity on December 31, 2019?
12,041,368.10
How much is the unused NCA that is needed to be adjusted at the of the year?
158,000
How much is the depreciation for the year 2019?

680,000
How much is the Personnel Services?

1,247,400
How much is the MOOE?

752,600
QUIZ 9 – ARIL 10 – GOV’T ACTTG
A nonprofit college received in the current year a certain amount from a donor with the stipulation that
the contribution be used to support faculty teaching during the next fiscal year. The administrators of the
college awarded research grants equal to the contribution in accordance with the instruction of the
donor. The college should report the contribution in the current year as
A. Temporarily restricted revenue in the statement of activities
For a private nonprofit organization, when is a donor’s conditional promise to give considered
unconditional?
B. When the possibility that the condition will not be met is remote.
A prominent art collector donated an art collection to a private nonprofit museum with the stipulation
that the art collection be shown to the public, that it should be preserved and not be sold. What was the
effect of the donation on the museum’s financial statements?
C. Permanently restricted net assets increased
A nonprofit organization should report a contribution for the construction of a building as cash flows
from which of the following?
A. Financing activities
In the prior year, an alumnus of a private nonprofit high school made a contribution with the stipulation
that the donation be used for faculty travel during the current year. During the current year, the school
spent all the donation for faculty travel expenses. What was the effect of the donation on unrestricted
net asset for the current year?
B. No effect on unrestricted net assets and decrease in temporarily restricted net assets.
Which of the following private nonprofit entities is required to prepare a statement of functional
expenses meaning by function and by natural classification?
C. Voluntary health and welfare organization
Which categories are used in the statement of financial position of a nonprofit organization?
C. Assets, liabilities, and net assets
Which of the statement of a private nonprofit hospital reports the changes in unrestricted, temporarily
restricted and permanently restricted net assets for a time period?
C.Statement of Changes in net assets
How is charity care accounted for in the statement of a nonprofit health care organization?
D.Not included in the financial statements
When a nonprofit organization is preparing the year-end financial statements, which of the following
statements is required?
B. Statement of cash flows
How should a nonprofit organization report depreciation in the statement of activities?

B. It should be included as a decrease in unrestricted net assets
For a private health organization, which is included in patient service revenue?
A.Contractual adjustment
How should a nongovernmental not for profit organization classify gains and losses on investments
purchased with permanently restricted assets?
D. Unless explicitly restricted by donor or law, gains and losses should be reported in the statement of
activities as increases or decreases in permanently restricted net assets.
Philippine Museum has both regular and term endowment. In the museum’s statement of financial
position, how should the net assets of each type of endowment be reported?
A. Term endowment as temporarily restricted and regular endowment as permanently restricted.
The assets in a quasi-endowment fund should be included in which of the following classifications?
B. Unrestricted net assets
A family lost its home in a recent fire. At the current year-end, a philanthropist sent money to a nonprofit
benevolent organization to purchase furniture for the family in the next year. The organization purchased
this furniture for the family. How should this receipt of money be reported by the organization in the
financial statements for the current year?
D.As a liability
Which classification is required for reporting of expenses by all nonprofit organizations?

B.Functional classification in the statement activities or notes to financial statements.
An entity is a nongovernmental not-for-profit organization involved inresearch. The statement of

functional expenses should classify which of the following as support services?
B.Salaries of fund-raisers for fund used in research
Which is not a component of the financial statements of a nonprofit organization?

B.Statement of Changes in fund balance
A nonprofit private elementary school occupies its school building rent-free as permitted by the building
owner. The existence of rent-free facilities is recognized as
C.Rent expense and contributions revenue
Which would result to reclassifications of net assets of a nonprofit organization/

B.Expiration of donor-imposed restriction.
A storm broke the glass windows in the building of a religious organization. A member of the
organization replaced the windows at no charge. In the statement of activities of the religious
organization, the breakage and replacement of the windows should
C.Be reported as an increase in both expenses and contributions
Which would result in an increase in unrestricted net assets for the current year?
A.A private nonprofit hospital earned interest on investments that were board-designated.
The statement of financial position of a private nonprofit organization shall report net assets according
to which of the following classifications?
D.Unrestricted, temporarily restricted and permanently restricted
All of the following are classified as financing activities of a nonprofit organization, except
D.Cash contribution from a donor who stipulated that the money be spent in accordance with the
decision of the governing board.
For Guiding Light, a nongovernmental nonprofit religious education, net assets that can expended in
accordance with the wishes of the governing board should be reported as
A.Unrestricted
In the nonprofit university’s statement of cash flows for the current year, all of the following cash inflows
shall be reported as operating activities, except
B.From a donor who stipulated that the money be invested indefinitely
In the statement of activities for nonprofit organization, expenses should be deducted from
A.Unrestricted
A nongovernmental nonprofit organization’s statement of activities is similar to which of the following

for profit organization?
B.Income statement
A successful alumnus of a private university has recently donated a certain amount to the university for
the purpose of funding a “center for the study of sports ethics”. This donation is conditional upon the
university raising an amount matching the donation within twelve months. The university administrators
estimate that they have a 50% chance of raising the additional money. How should this donation be
accounted for?
C.As a refundable advance
QUIZ 10 – APRIL 17 – GOV’T ACCTG

1. Psalm Hospital, a private nonprofit hospital, earned P500,000 revenues from its gift shop located at
the lobby and spent P100,000 on research during the year ended December 31, 2020. The P100,000
spent on research was part of a P150,000 contribution received during December 2018 from a donor
who stipulated that the donation be used for medical research. None of the gift shop revenues were
spent in 2020. What was the increase in unrestricted net assets from the events that occurred during
2020?
500,000
2. The following expenditures were incurred by a nonprofit botanical society:

Printing of annual report 25,000
Unsolicited merchandise sent to encourage contribution 50,000
What amount should be classified as fund-raising costs in the society’s activity statement?
50,000
3. In 2020, the board of trustees of TCMC Private University designated P250,000 from its current funds
for college scholarships. Also in 2020, the university received bequest of P500,000 from an estate of a
benefactor who specified that the bequest was to be used for hiring teachers to tutor handicapped
students. None of the bequest has been spent. What amount should be accounted for as restricted
net assets?
500,000
4. Rizza Foundation, a nonprofit organization, received following cash contributions during the year to
support its childcare center:
a. P50,000 restricted by the donor to be used for meals of children.
b. P37,500 received by subscriptions to a monthly childcare magazine with a fair value to subscribe
of P25,000
c. P25,000 to be used only upon completion of a new playroom that was 75% complete at current
year-end. What amount should be recorded as contribution revenue in current year?
62,500
5. The following funds were among those held by URS at December 31, 2020:
Principal Specified by the Donor as Non-Expendable 1,250,000
Principal Expendable After the Year 2020 750,000
Principal Designated from Current Funds 250,000
What amount should be classified as regular endowment funds?
1,250,000
6. AAA Hospital, a nonprofit hospital affiliated with a private university, reported the following:
Cash contributions received from the donors for acquisition of computer equipment 300,000
Proceeds from sales of hospital gift shop and snack bar 150,000
Dividend income not restricted by donor 50,000
What amount should be reported as “other revenue and gains” in the statement of activities?
200,000
7. An organization of high school seniors performs services for patients at Morong Doctors Hospital.
These students are volunteers and perform services that the hospital would not otherwise provide,
such as wheeling patients in the park and reading to patients. Morong Doctors has no employer-
employee relationship with these volunteers, who donated 500 hours of service. At the minimum
wage rate, these services would amount to P46,875, while it estimated that the fair market value of
these services was P62,500. In Hospital’s statement of revenues and expenses, what amount should
be reported as nonoperating revenue?
0
8. Rev University, a nonprofit university assessed its students P600,000 for tuition and miscellaneous
fees for the 2020 summer session. The net amount realized was only P580,000 because of the
following reductions:
Tuition remissions granted to faculty member families 6,000
Class cancelation refunds 14,00
How much unrestricted current fund revenues from tuition and miscellaneous fees should rev
University report for the period?
586,000
9. In April 2020, Ruth donated P250,000 cash to her church, with the stipulation that the income
generated from this gift is to be paid to Claire during her lifetime. The conditions of this donation are
that, after Ruth dies, the principal can be used by the church for any purpose voted on by the church
elders. The church received interest of P20,000 on the P250,000 for the year ended March 31, 2021
and the interest was remitted to Claire. In the church’s March 31, 2021 financial statements
P250,000 should be reported as deferred support in the balance sheet.
10. How should the cash flows be reported in NPO Statement of Cash Flows for the year ended
December 31, 2021?
Cash disbursements for investing activities by P20,000
On January 1, 2020, a nonprofit organization received P1,000,000 cash donation from a donor who
stipulated that the amount should be invested indefinitely in revenue producing investment. The deed
of donation also provided that the dividend income shall be used for the acquisition of computers of
the nonprofit organization.
On December 31, 2020, the nonprofit organization received P100,000 cash as dividend income from the
investment of the fund.
On January 1, 2021, the nonprofit organization acquired a computer at a cost of P20,000 with a useful
life of 5 years without residual value.
11. How should the cash flow be reported in NPO Statement of Cash Flow for the year ended December
31, 2020?
Cash receipts from financing activities by P1,100,000
12. In the statement of activities of the NPO for the year ended December 31, 2021, which of the
following is the proper effect of the transactions?
Increase in unrestricted net assets by P16,000.
In the first year of operations of a nonprofit organization, the following transactions occurred:
 The nonprofit organization received P1,000,000 fund from a donor who stipulated that it shall be
invested indefinitely and the dividend from such investment shall be used for research project of
the organization. Dividend amounting to P150,000 was received during the year but only P50,000
was spent for the research project.
 The nonprofit organization received P300,000 fund from a donor who stipulated that it shall be
used for the acquisition of service car. The nonprofit organization used P100,000 of the fund for
the acquisition pf a service car with useful life of 5 years. The car was acquired at the middle of the
year.
 The nonprofit organization received P500,000 fund from a donor who stipulated that it shall be
based on the discretion of the Board of Trustees of the Nonprofit organization. The nonprofit
organization used P100,000 for the acquisition of souvenir items which were sold by the nonprofit
organization for P150,000.
The remaining 400,000 was designated by the Board of Trustees for future fundraising projects.
13. What is the amount of permanently restricted net assets at the end of the first year?
1,000,000
14. What is the amount of unrestricted net assets at the end of the first year?
640,000
15. What is the amount of temporarily restricted net assets at the end of the first year?
300,000
QUIZ 11 – APRIL 24 – GOV’T ACCTG

4/5
Cooperative began operations on January 1, 2013. During the year ended December 31,2014, the
accounting records have been maintained on a double entry basis but the bookkeeper failed to make
necessary journal entry. They applied tax exemption to BIR and subsequently approved.
Cash 1,800,000
Land 730,000
Equipment 3,000,000
Purchases 3,000,000
Expenses 790,000
Interest expense 180,000
Note payable 1,500,000
Sales 5,500,000
Share capital 2,000,000
Earnings 500,000
TOTALS 9,500,000 9,500,000
The following information was made available.
1. Accounts receivable
December 31,2014 500,000
December 31,2013 350,000
2. Included in sales was Pl00,000 deposited by a customer for merchandise to be delivered in 2015.
3. Accounts payable
December 31,2014 450,000
December 31,2013 400,000
4. Expenses include P30,000 one-year insurance dated May 1, 2014
5. The note payable of P1,500,000 is a one-year note issued and discounted at 12% on November
1, 2014.
6. It is estimated that 5% of the outstanding accounts receivable on December 31, 2014 may prove
uncollectible.
7. Accrued expense
December 31, 2014 75,000
December 31, 2013 60,000
8. Inventory
December 31,2014 600,000
December 31,2013 450,000
9. The equipment' was acquired on January 1, 2013. The estimated life is 10 years.
Adjustments are necessary on December 31, 2014 for the preparation of accrual basis financial
statements.
Reserve Fund 50%
Education and Training Fund 10%
Optional Fund 7%
Community Development Fund 3%
Prepare the necessary journal entry.
What is the Community Development Fund for 2014?

A. 22,500
B. 20,325
C. 22,875
D. 22,575
What is the Reserve Fund for 2014?
A. 750,000
B. 677,500
C. 762,500
D. 752,500
What is the Optional Fund for 2014?
A. 105,000
B. 98,450
C. 106,750
D. 105,350
What is the Education and Training Fund for 2014?
A. 150,000
B. 133,500
C. 152,500
D. 150,500
What is the Total Assets for 2014?
A. 5,692,500
B. 6,165,000
C. 5,684,625
D. 5,690,925
Accounting for Not-for-Profit Organizations
General Concepts:
1. Unconditional promises to give are recognized as contribution revenue when
a. The promise is received

b. The related receivable is collected
c. The time or purpose restriction is satisfied
d. The future event that binds the promisor occurs
(Adapted)
2. Net assets that are restricted by the governing board of a nongovernment , not-for-
profit organization are reported as a part of:
a. Permanently restricted net assets

b. Temporarily restricted net assets
c. Unrestricted net assets
d. Either permanently restricted or temporarily restricted net assets,
depending on the term of the restriction
(Adapted)
3. Which of the following is not a characteristic of a conditional promise to give:
a. Depends on the occurrence of a specified future and uncertain event to

bind the promisor
b. Gift may have to be returned to donor if condition is not met
c. Recognized as contribution revenue when the conditions are substantially
met
d. Depends on demand by the promiseefor the performance
(Adapted)
4. Unconditional promise to give that are collectible within one year of the financial
statement date:
a. Should be reported at their gross amount

b. Should be reported at the gross amount less an allowance for
uncollectible accounts
c. Should be reported at the present value of the amounts expected to be
collected, using the donor’s incremental borrowing note
d. Should not be reported until collected
(Adapted)
5. When a temporary restriction on resources of a nongovernment, not-for-profit

entity is met by the incurrence of an expense for the restricted purpose:
a. The expense is reported in the statement of activity as an increase in

unrestricted net assets
b. Amounts reported in the temporarily restricted net assets are
reclassified as unrestricted net assets
c. The entry is a debit to expense and a credit to the program services
d. The expense is reported in restricted net assets
(Adapted)
6. How will a nongovernment, not-for-profit entity record an agency transaction in

which it receives resources?
a. No entry is made in the accounts

b. Debit the asset account and credit contribution revenue
c. Debit the asset account and credit temporarily restricted net assets
d. Debit the asset account and credit a liability account
(Adapted)
7. Financial statements of a Not-For-Profit Organization, focuses on:
a. Basic information for the organization as a whole

b. Standardization of funds nomenclature
c. Inherent differences of not-for-profit organizations that impact reporting
presentations.
d. Distinctions between current fund and noncurrent fund
(Adapted)
8. In preparing the statement of cash flows for a nongovernment, not-for-profit entity,

cash contributions that are restricted for long term pruposes are classified as:
a. Operating Activities
b. Investing Activities
c. Financing Activities
d. Capital and related financing activities
(Adapted)
9. Long-lived assets are purchased by a nongovernment, not-for-profit entity with cash

that was restricted for that purpose. The assets are reported in temporarily
restricted net assets. Depreciation expense is reported in unrestricted net assets.
a. The depreciation expense is incorrectly reported

b. An amount equal to the depreciation is reclassified from temporarily
restricted to unrestricted net assets
c. An amount equal to the depreciation is reclassified from temporarily
restricted to restricted net assets
d. An amount equal to the depreciation is reported as revenues
(Adapted)
10. A nongovernment, not-for-profit entity gives donors a sweatshirt imprinted with its
logo when they pay P15 dues. The value of the sweatshirt is approximately P15. This
transaction is most likely reported as:
a. An exchange transaction
b. An agency transaction
c. A contribution
d. A gift in kind
(Adapted)
11. A large not-for-profit organization’s statement of activities should report the net
change for net assets that are
Unrestricted Permanently Restricted

a. Yes Yes
b. Yes No
c. No No
d. No Yes
(AICPA)
12. A statement of financial position (balance sheet), which reports unrestricted

temporarily restricted, and permanently restricted net assets, is required for which
one of the following organizations?
I. A public university
II. A private, not-for-profit hospital
a. Both I and II
b. I only
c. Neither I nor II
d. II only
13. Which of the following classifications is required for reporting of expenses by all
not-for-profit organizations?
a. Natural classification in the statement of activities or notes to the financial

statements.
b. Functional classification in the statement of activities or notes to the
financial statements.
c. Functional classification in the statement of activities and natural
classification in a matrix format in a separate statement.
d. Functional classification in the statement of activities and natural
classification in the notes to the financial statements.
(AICPA)
14. Which prescribes the financial statements of not-for-profit organizations, reporting
reclassifications is caused by which of the following?
I. Expiration of donor-imposed conditions.

II. Expiration of donor-imposed restrictions.
a. I only
b. Both I and II
c. II only
d. Neither I nor II
(AICPA)
15. Which of the following transactions or events would cause increase in unrestricted
net asset for the year-ended December 31, 2012?
I. A voluntary health and welfare organization spent a restricted

donation which was received in 2011. In accordance with the donor’s
wishes, the donation was spent on public health education during
2012.
II. During 2012, a private, not-for-profit college earned dividend and
interest on term endowments. Donors placed no restriction on the
earnings of term endowments. The governing board a college intends
to use this investment income to fund undergraduate scholarships for
2013.
a. II only c. Neither I nor II

b. I only d. Both I and II
(AICPA)
Accounting for Hospital/Health Care Providers:
16. Tina Hospital’s patient service revenues for services provided in 2011, at
established rates, amounted to P8,000,000 on the accrual basis. For internal
reporting, Tina uses the discharged method. Under this method, patient service
revenues are recognized only when patients are discharged, with no recognition
given to revenues accruing for services to patient’s not yet discharged. Patient
service revenues at established rates using the discharge method amounted to
P7,000,000 for 2011. According to generally accepted accounting principles, Tina
should report patient service revenues for 2011 of
a. Either P8,000,000 or P7,000,000, at the option of the hospital

b. P8,000,000
c. P7,500,000
d. P7,000,000
(AICPA)
17. During 2011, UST Hospital purchased medicines for hospital use totalling P800,000.
Included in this P800,000 was an invoice of P10,000 that was cancelled in 2011 by
the vendor because the vendor wished to donate this medicine to UST. This donation
of medicine should be recorded as
a. A P10,000 reduction of medicine expense.

b. An increase in other operating revenue of P10,000.
c. A direct P10,000 credit to the general (unrestricted) funds balance.
d. A P10,000 credit to the restricted funds balance.
(AICPA)
18. St. Luke’s Hospital received an unrestricted bequest of P100,000 in 2011. This
bequest should be recorded as
a. A memorandum entry only.

b. Other operating revenue of P100,000.
c. Non-operating revenue of P100,000.
d. A direct credit of P100,000 to the fund balance.
(AICPA)
19. On March 1, 2011, KatkatOng established a P100,000 endowment fund, the income
from which is to be paid to Cebu Hospital for general operating purposes. Cebu does
not control the fund’s principal. KatkatOng appointed Philippine National Bank as
trustee of this fund. What journal entry is required by Cebu to record the
establishment of the endowment?
Debit Credit
a. Cash…………………………………………. P100,000
Nonexpendable endowment fund P100,000
b. Cash…………………………………………. 100,000
Endowment fund balance……… 100,000
c. Nonexpendable endowment fund…... 100,000
Endowment fund balance 100,000
d. Memorandum entry only
(AICPA)
20. In 2011, St. Paul Hospital received an unrestricted bequest of common stock with a
fair market value of P50,000 on the date of receipt of the stock. The testator had paid
P20,000 for this stock in 2009. St. Paul Hospital should record this bequest as
a. Non-operating revenue of P50,000

b. Non-operating revenue of P30,000
c. Non-operating revenue of P20,000
d. A memorandum entry only.
(AICPA)
21. Capitol Hospital has a marketable equity securities portfolio that is appropriately
included in noncurrent assets in unrestricted funds. The portfolio has an aggregate
cost of P300,000. It had an aggregate fair market value of P250,000 at the end of
2012 and P290,000 at the end of 2011. If the portfolio was properly reported in the
balance sheet at the end of 2011, the change in the valuation allowance at the end of
2012 should be
a. P0.
b. A decrease of P40,000
c. An increase of P40,000
d. An increase of P50,000
(AICPA)
22. Philippine General Hospital’s accounting records disclosed the following

information:
Net resources invested in plant assets…………………………….. P10,000,000

Board-designated funds…………………………………………………. 2,000,000
What amount should be included as part of unrestricted funds?
a. P12,000,000 c. P2,000,000
b. 10,000,000 d. 0
(AICPA)
23. East Avenue Hospital fiscal year ends May 31,2011. In March 2011, a P300,000
unrestricted bequest and a P500,000 pure endowment grant were received. In April
2011, a bank notified East Avenue that the bank received P10,000 to be held in
permanent trust by the bank. East Avenue is to receive the income from this
donation.
East Avenue should record the P300,000 unrestricted bequest as
a. Non-operating revenue
b. Other operating revenue
c. A direct credit to the fund balance
d. A credit to operating expenses
(AICPA)
24. Using the same information in No. 23, the P500,000 pure endowment grant:
a. May be expended by the governing board only to the extent of the

principal since the income from this fund must be accumulated.
b. Should be reported as non-operating revenue when the full amount of
principal is expended
c. Should be recorded as a memorandum entry only
d. Should be accounted for as donor-restricted funds upon receipt
(AICPA)
25. Using the same information in No. 23, the donation P10,000 being held by the bank
is permanent trust should be:
a. Recorded in East Avenue’s restricted endowment fund

b. Recorded by East Avenue as non-operating revenue
c. Recorded by East Avenue as other operating revenue
d. Disclosed in notes to East Avenue’s financial statements
(AICPA)
26. UE Hospital, a voluntary institution, has a pure endowment fund, the income from
which is required to be used for library acquisitions. Philippine law and the donor
are silent on the accounting treatment for investment gains and losses. In 2011, UE
Hospital sold 1,000 shares of stock from the endowment fund’s investment portfolio.
The carrying amount of these securities was P50,000. Net proceeds from the sale
amounted to P120,000. This transaction should be recorded I the endowment fund
as a debit to cash for P120,000 and as credits to
a. Endowment fund principal, P50,000 and endowment fund revenue,

P70,000
b. Endowment fund principal, P50,000 and due to the general fund ,
P70,000
c. Investments, P50,000 and endowment fund balance, P70,000
d. Investments, P50,000 and endowment fund revenue, P70,000
(AICPA)
27. Land valued at P400,000 and subject to a P150,000 mortgage was donated to Makati
Medical Hospital without restriction as to use. Which of the following entries should
Makati Medical make to record this donation?
a. Land………………………………………………...........................P400,000
Mortgage Payable…………………………………… 150,000
Endowment Fund Balance………………………. 250,000
b. Land…………………………………….…………...........................P400,000
Debt Fund Balance……...…………………………… 150,000
Contributions………………………………………….. 250,000
c. Land……………………………………………….............................P400,000
Debt Fund Balance …………………………………… 150,000
Endowment Fund Balance………………………….250,000
d. Land………………………………………………..............................P400,000
Mortgage Payable…………………………………… …150,000
Unrestricted Fund Balance………………………….250,000
(AICPA)
28. In June 2011, San Antonio Hospital purchased medicines from Park Pharmaceutical
Co. at a cost of P1,000. However, Park notified San Antonio that the invoice was
being canceled and that the medicines were being donated to San Antonio. San
Antonio should record this donation of medicines as
a. Other operating revenue P1,000

b. A P1,000 credit to operating expense
c. A P1,000 credit to non-operating expense
d. A memorandum entry only
(AICPA)
29. Williams Hospital, a nonprofit hospital affiliated with a religious group, reported the
following information for the year ended December 31, 2011:
Gross patient service revenue at the hospital’s

established rates……………………………………………………… P980,000
Bad debts expense……………………………………………………………… 10,000
Contractual adjustments with third-party payors………………… 100,000
Allowance for discounts to hospital employees……………………. 15,000
On the hospital’s statement of operations for the year ended December 31, 2011,
what amount should be reported as net patient service revenue?
a. P865,000 c. P855,000
b. 880,000 d. 955,000
(AICPA)
30. Princess Hospital, a non-profit hospital affiliated with a private university, provided
P200,000 of charity care for patients during the year ended December 31,2011. The
hospital should report the charity care:
a. As net patient service revenue of P200,000 on the statement of

operations
b. As net patient service revenue of P200,000 and as operating expense
of P200,000 on the statement of operation
c. As Accounts Receivable of P200,000 on the balance sheet at December
31,2011
d. Only in the notes to the financial statements for 2011
(AICPA)
31. Leslie Hospital, a non-profit hospital affiliated with a private university , reported
the following information for the year ended December 31,2011
Cash Contributions received from donors for capital
additions to be acquired in 2012………………………………P150,000
Proceeds from sales at hospital gift shop and snack bar……….. 75,000
Dividend revenue not restricted by donors or by law………….... 25,000
Using the information provided, what amount should be reported as “other revenue
and gains" on the hospital’s statement of operations for the year ended December 31,2011:
a. P25,000 c. P100,000
b. 75,000 d. 250,000
(AICPA)
32. FEU Hospital a non-profit hospital affiliated with FEU University, received the
following cash contributions from donors during the year ended December 31,
2011.
Contributions restricted by donors for research……………….P50,000

Contributions restricted by donors for Capital
acquisitions…………………………………………………………..250,000
Neither of the contributions was spent during 2011, however, during 2012, the
hospital spent the entire P50,000 contribution on research and the entire P250,000
contribution on a capital asset which was placed into service during the year. On the
hospital’s statement of operations for the year ended December 31, 2012. What total
amount should be reported for “net assets released from restrictions”?
a. P 50,000 c. P250,000
b. 300,000 d. 0
(AICPA)
33. St. Luke’s Hospital a private not-for-profit hospital, had the following cash receipts
for , the year ended December 31, 2011, would report an increase in operating
activities of:
Patient Service Revenue…………………………………………P300,000

Gift Shop Revenue…………………………………………………. 25,000
Interest Revenue restricted by donor stipulation
for acquisition of equipment………………………. 50,000
As a result of these cash receipts, the hospital’s statement of cash flows for the year
ended December 31, 2011, would report an increase in operating activities of
a. P325,000 c. P350,000
b. 375,000 d. 300,000
(AICPA)
34. St. Paul’s Hospital, a non-profit hospital affiliated with St. Paul College , had the
following cash receipts for the year ended December 31, 2011:
Collections of health care receivables……………………… P750,000

Contribution from donor to establish a term endowment 250,000
Tuition from nursing school……………………………………. 50,000
Dividends received from investments in permanent
endowment 80,000
The dividends received are restricted by the donor for hospital building
improvements. No improvements were made during 2011. On the hospital’s
statement of cash flows for the year ended December 31,2011, what amount of these
cash receipts would be included in the amount reported for net cash provided
(used) by operating activities?
a. P880,000 c. P1,050,000
b. 800,000 d. 750,000
(AICPA)
35. Chinese General Hospital a non-profit hospital affiliated with a religious group,
received the following cash contributions from donors during the year ended
December 31, 2011:
For capital acquisitions……………………………………………… P400,000

For permanent endowments……………………………………… 300,000
The cash received for capital acquisitions will be spent in 2012, while the cash
received for the permanent endowment was used to acquire investments during
2008. What effect did these cash contributions have on the amounts reported for the
cash flows from investing activities and cash flows from financing activities on the
statement of cash flows for the year ended December 31, 2011:
Cash flows from Cash flows from

Investing activities Financing activities
a. Decrease P300,000 Increase P400,000
b. Decrease P700,000 Increase P700,000
c. Decrease P300,000 Increase P300,000
d. Decrease P300,000 Increase P400,000
(AICPA)
36. Clara Hospital, a private not-for-profit hospital, earned P250,000 of gift shop
revenues and spent on research during the year ended December 31, 2012. The
P50,000 spent on research was part of a P75,000 contribution received during
December of 2011 from a donor who stipulated that the donation be used for
medical research. Assume none of the gift shop revenues were spent in 2012. For the
year ended December 31, 2012, what was the increase in unrestricted net assets
from the events occurring during 2012?
a. P300,000 c. P250,000
b. 200,000 d. 275,000
(AICPA)
37. In hospital accounting, restricted funds are
a. Not available unless the Board of Directors remove the restrictions

b. Restrictions as to use only for board-designated purposes
c. Not available for current operating use; however, the income
generated by the funds is available for current operating use
d. Restricted as to use by the donor, grantor, or other source of the
resources
(AICPA)
38. In addition to the statement of changes in net assets, which of the following financial
statements should not-for-profit hospitals prepare?
a. Balance sheet and income statement

b. Balance sheet, income statement, and statement of changes in
financial position
c. Balance sheet, statement of operations, and statement of cash
flows
d. Statement of funds, statement of operations, and statement of cash
flows
(AICPA)
39. In the balance sheet of a not-for-profit hospital, marketable equity securities should
be reported at
a. The lower of aggregate cost or market in separate portfolios for

unrestricted current, unrestricted noncurrent, restricted
current, and unrestricted current assets
b. The lower of aggregate cost or market in separate portfolios for
unrestricted and restricted assets
c. The lower of aggregate cost or market in separate portfolios for
current and noncurrent assets
d. Cost, with no valuation for declines in market value, and in separate
portfolios for unrestricted and unrestricted assets
(AICPA)
40. The property, plant and equipment of a not-for-profit hospital should be accounted
for as part of
a. Unrestricted funds
b. Restricted funds
c. Specific purpose funds
d. Other non-operating funds
(AICPA)
41. Equipment donated for use in a hospital should be reported as
a. Other operating revenues

b. Non-operating revenues
c. Additions to the unrestricted funds balance
d. Additions to the restricted funds balance
(AICPA)
42. Revenue from the parking lot operated by a hospital would normally be included in
a. Patient service revenues

b. Ancillary service revenues
c. Other operating revenues
d. Other non-operating revenues
(AICPA)
43. Quezon City’s community hospital, which uses enterprise fund reporting normally
includes proceeds from sale of cafeteria meals in
a. Patient service revenues

b. Other operating revenues
c. Ancillary service revenues
d. Deductions from dietary service expenses
(AICPA)
44. Revenue from a hospital from grant’s specified by the donor for research would
normally included in
a. Other non-operating revenue

b. Other operating revenue
c. Patient service revenue
d. Ancillary service revenue
(AICPA)
45. A hospital should report earnings from endowment funds that are restricted to a
specific operating purpose as
a. General fund revenues, when expended

b. Endowment fund revenues, when expended
c. General fund revenues, when received
d. Endowment fund revenues, when received
(AICPA)
Accounting for Colleges and Universities:
46. University of Santo Tomas unrestricted current funds comprised the following:
Assets………………………………………………………………………………..P 5,000,000
Liabilities(including deferred revenues of P100,000)………….. 3,000,000
The fund balance of net assets of University of Santo Tomas unrestricted current
funds was
a. P1,900,000 c. P2,100,000
b. 2,000,000 d. 5,000,000
(AICPA)
47. For the 2011 summer session, Far Eastern University assessed its students
P300,000 for tuition and fees. However, the net amount realized was only P290,000
because of the following reductions:
Tuition remissions granted to faculty members’ families.. P3,000

Class cancellation refunds……………………………………………. 7,000
How much unrestricted current funds revenues from tuition and fees should Far
Eastern University report for period?
a. P290,000 c. P297,000
b. 293,000 d. 300,000
(AICPA)
48. For the summer session of 2011, Siliman University assessed its students
P1,700,000 (net of refunds), covering tuition and fees for educational and general
purposes. However, only P1,500,000 was expected to be realized because
scholarships totalling P150,000 were granted to students, and tuition remissions of
P50,000 were allowed to faculty members’ children attending Siliman. What amount
should Siliman include in the unrestricted current funds as revenues from student
tuition and fees?
a. P1,500,000 c. P1,650,000
b. 1,550,000 d. 1,700,000
(AICPA)
49. The following receipts were among those recorded by St. Louis College during 2011:
Unrestricted gifts……………………………………………………… P500,000
Restricted current funds (expended for
current operating purposes)…………………………... 200,000
Restricted current funds (not yet expended)……………... 100,000
The amount that should be included as :
Current Fund Current Fund

Revenues Revenue Revenues Revenue
a. P800,000 P700,000 c. P600,000 P600,000

b. 700,000 800,000 d. 500,000 500,000
(AICPA)
50. The following information was available from St. Louis University’s accounting
records for its current funds for the year ended March 31, 2011:
Restricted gifts received

Expended …………………………………………………….. P100,000
Not expended ………………………………………………. 300,000
Unrestricted gifts received
Expended……………………………………………………... 600,000
Not expended……………………………………………….. 75,000
What amount should be included in current funds revenues for the year ended
March 31, 2011?
a. P600,000 c. P775,000
b. 700,000 d. 1,000,000
(AICPA)
51. The following funds were among those held by Centro Escolar University at
December 31,2011:
Principal specified by the donor as non-expendable … P500,000

Principal expendable after the year 2012 ………………... 300,000
Principal designated from current funds ………………… 100,000
What amount should Centro Escolar University classify as regular endowment funds
(or Permanently Restricted Endowments)?
a. P100,000 c. P500,000
b. 300,000 d. 900,000
(AICPA)
52. On January 2. 2011, a graduate of Ateneo established a permanent trust fund and
appointed Security Bank as the trustee. The income from the trust fund is to be paid
to Ateneo and used only by the school of education to support student scholarships.
What entry is required on Ateneo’s books to record the receipt of cash from the
interest on the trust fund?
a. Debit cash and credit restricted current funds deferred revenue.

b. Debit cash and credit restricted endowment revenue.
c. Debit cash and credit endowment fund balance.
d. Debit cash and credit unrestricted endowment revenue.
(AICPA)
53. In 2011, University of San Augustin board of trustees established a P100,000 fund to
be retained and invested for scholarship grants. In 2011, the fund earned P6,000
which had not been disbursed at December 31, 2001. What amount should
University of san Agustin report in a quasi-endowment fund balance at December
31, 2011?
a. P 0 c. P100,000
b. b. 6,000 d. 106,000
(AICPA)
54. Sienna College, a private not-for-profit college, received the following contributions
during 2011:
I. P5,000,000 from alumni for construction of a new wing on the science

on the science building to constructed in 2012.
II. P1,000,000 from a donor who stipulated that the contribution be
invested indefinitely and that the earnings from investments amounted to
P50,000
For the year ended December 1, 2011, what amount of these contributions should
be reported as temporarily restricted revenues on the statement activities?
a. P 50,000 c. P5,000,000
b. 5,050,000 d. 6,050,000
(AICPA)
55. On November 30, 2011, Malou Basil, an alumnus at Santo School, a private not-for-
profit high school, contributed p15,000, with the stipulation that the donation be
used for faculty travel expenses during 2012. During 2012 Santo spent all of the
donation in accordance with Malou’s wishes. For the year ended December 31, 2012,
what was the effect of the donation on unrestricted and temporarily net assets?
Unrestricted Temporarily restricted

net assets net assets
a. Increase Decrease
b. No effect Decrease
c. Increase No effect
d. No effect No effect
(AICPA)
56. Liway College, a private not-for-profit college received P25,000 from Ms. Mary
Basilio on April 30, 2011. Ms. Basilio stipulated that her contribution be used to
support faculty research during the fiscal year beginning on July 1, 2011. On July 15,
2011, administrations of Liway awarded grants totaling P25,000 to several faculty in
accordance with the wishes of Ms. Basilio. For the year ended June 30., 2011. Liway
Collegeshould report the P25,000 contributions as
a. Temporarily restricted revenues on the statement of activities.

b. Unrestricted revenue on the statement of activities.
c. Temporarily restricted deferred revenue on the statement of activities.
d. An increase in fund balance on the statement of financial position.
(AICPA)
57. On July 31, 2011, St. Vincent’s College showed the following amounts to be used foe
Renewal and replacement of college properties …………… P200,000

Retirement of indebtedness on college purposes………….. 300,000
Purchased of physical properties for college purposes
but unexpected at 7/3/2011…………………………….. 400,000
What total amount should be included in St. Vincent’s plant funds at July 31, 2011?
a. P900,000 c. P400,000
b. 600,000 d. 200,000
(AICPA)
58. Albert University, a private not-for-profit university, had the following cash inflows
during the year ended June 30, 2011:
1. P500,000 from the students tuition.

2. P300,000 from a donor who stipulated that the money be invested
indefinitely.
3. P100,000 from a donor who stipulated that the money be spent in
accordance with the wishes of Albert’s governing board.
On Albert University’s statement of cash flows for the year ended June 30, 2011,
what amount of these cash flows should be reported as operating activities?
a. P900,000 c. P800,000
b. 400,000 d. 600,000
(AICPA)
59. The current funds group of anon-for profit private university includes which of the
following?
Annuity funds Loan funds
a. Yes Yes
b. Yes No
c. No No
d. No Yes
(AICPA)
60. The plant funds group of a non-for-profit private university incudes which of the
following subgroups?
Investment in Unexpected
Plant funds plant funds
a. No Yes
b. No No
c. Yes No
d. Yes Yes
(AICPA)
61. Which of the following funds are usually encountered in a not-for-profit private
university?
Current Funds Plant Funds

a. No Yes
b. No No
c. Yes No
d. Yes Yes
(AICPA)
62. Which of the following funds are usually encountered in a not-for-profit private
university ?
Loan Funds Life income funds
a. No Yes
b. No No
c. Yes No
d. Yes Yes
(AICPA)
63. An alumnus donates securities to San Sebastian College and stipulates that the
principal be held in perpetuity and revenues be used for faculty travel. Dividends
received from the securities should be recognized as revenues in
a. Endownment funds.
b. Quasi-endowment funds
c. Restricted current funds.
d. Unrestricted current funds.
(AICPA)
64. A college’s plant funds group includes which if the following subgroups?
I. Renewals and replacement funds.

II. Retirement of indebtedness funds.
III. Restricted current funds.
a. I and II. c. II and III.

b. I and III. d. I only.
(AICPA)
65. Funds received by a college from donors who have stipulated that the principal is
nonexpendable but that the income generated may be expended by current
operating funds would be accounted for in the
a. Endowment fund.
b. Term endowment
c. Agency fund.
d. Quasi-endowment fund.
(AICPA)
66. In the loan fund of a college, each of the following types of loans would be found
except
a. Faculty
b. Computer
c. Staff
d. Student
(AICPA)
According for Voluntary Health and Welfare Organizations.
67. Charity funds is a voluntary welfare organizations funded by contributions from the
general public. During 2011, unrestricted pledges of P100,000 were received, half of
which were payable in 2011, with the offer half payable in 2012 for use in 2012. It
wad estimated that 20% of the pledges would be uncollectible for 2011 as net
contributions, under public support, is
a. P100,000
b. 80,000
c. 50,000
d. 40,000
(AICPA)
68. In 2011, Manila Health, a voluntary health and welfare organization received a
bequest of P200,000 certificate of deposit maturing in 2012. The testator’s only
stipulations were that this certificate be held until maturity and that the interest
revenue be used to finance salaries for pre-school program, interest revenue for
2012 was P16,000. When the certificate matured and redeemed, the board of
trustees adopted a formal resolution designating P40,000 of the proceeds for the
future purchase of equipment for pre-school program. What amount should Manila
report in its 2012 year-end current funds balance designated for the pre-school
program?
a. P -0-
b. 16,000
c. 40,000
d. 56,000
(AICPA)
69. Light Hope, a voluntary health and welfare organization, received a cash donation of
P500,000 from Mr. Charles on November 15, 2011. Mr. Charcles requested that his
donation be used to acquire equipment costing P500,000 in January 2012. For the
year ended December 31, 2011. Light Hope should report the P500,000 contribution
on its
a. Statement of activities as unrestricted revenue.

b. Statement of financial position as temporarily restricted deferred revenue.
c. Statement of financial position as unrestricted deferred revenue.
d. Statement of activities as temporarily restricted revenue.
(AICPA)
70. No Ways, a voluntary health and welfare organization received a contribution of

P10,000 from a donor in 2011. The donor did not specify that the donation should
not be used until 2012. The governing board of No Ways spent the contribution in
2012 for fund-raising expenses. For the year ended December 31, 2011, No ways
should report the contribution on its
a. Statement of financial position as deferred revenue.

b. Statement of activities as unrestricted revenue.
c. Statement of financial position as an increase in fund balance.
71. On December 20, 2011, United , a voluntary health and welfare organization
received a donation of computer equipment valued at P25,000 from a local
computer retailer. The equipment is expected to have a useful life of 3 years. The
donor placed no restrictions on how long the computer equipment was to be used
and United has an accounting policy which does not imply a time restriction on gifts
a long-lived assets. On United’s statement of activities prepared for the year ended
December 31, 2011, the donation of computer equipment should be reported.
a. As an increase in temporarily restricted net assets

b. Only in the notes to the financial statement .
c. As an increase in unrestricted net assets.
d. As either an increase in temporarily restricted net assets or as an increase in
unrestricted net assets.
(AICPA)
72. United Love, a voluntary health and welfare organization, received the following
contributions in 2011:
I. P500,000 from donors who stipulated that the money not be spent
until 2012.
II. P1,000 from the donors who stipulated that the contributions be used
for the acquisition of equipment, none of which was acquired in 201.
Which of the above events increased temporarily restricted net assets for the year
ending December 31, 2011?
a. I only.
b. Both I and Ii.
c. II only.
d. Neither I or II.
(AICPA)
73. Which of the following transactions a voluntary health and welfare organization
would increase temporarily restricted net assets on the statement of activities for
the year ended June 30, 2011.
I. Received a contribution of P10,000 from a donor on May 15, 2011,

who stipulated that the donation not be spent until August of 211.
II. Spent P25,000 for fund-raising on June 20, 2011. The amount
expended came from a P25,000 contribution in March 12, 2011, the
donor stipulated that the contribution be used for fund-raising
activities.
a. Both I and II.
b. Neither I or II.
c. I only.
d. II only. (AICPA)
74. The equipment is expected to have a useful life of 3 years. The donor placed no
restrictions on how long the computer equipment was to be used and United has an
accounting policy which does not imply a time restriction on gifts a long-lived assets.
On United’s statement of activities prepared for the year ended December 31, 2011,
the donation of computer equipment should be reported.
a. As an increase in temporarily restricted net assets

b. Only in the notes to the financial statement .
d. As either an increase in temporarily restricted net assets or as an
increase in unrestricted net assets.
(AICPA)
contributions in 2011:
I. P500,000 from donors who stipulated that the money not be spent
until 2012.
II. P1,000 from the donors who stipulated that the contributions be used
for the acquisition of equipment, none of which was acquired in 201.
Which of the above events increased temporarily restricted net assets for the year
ending December 31, 2011?
a. I only.
b. Both I and Ii.
c. II only.
d. Neither I or II. (AICPA)
76. Which of the following transactions a voluntary health and welfare organization
would increase temporarily restricted net assets on the statement of activities for
the year ended June 30, 2011.
I. Received a contribution of P10,000 from a donor on May 15, 2011,

who stipulated that the donation not be spent until August of 211.
II. Spent P25,000 for fund-raising on June 20, 2011. The amount
expended came from a P25,000 contribution in March 12, 2011, the
donor stipulated that the contribution be used for fund-raising
activities.
a. Both I and II.
b. Neither I or II.
c. I only.
d. II only. (AICPA)
77. On December 31, 2011, Faith Heaven, a voluntary health and welfare organization,
receive a pledge from adonor who stipulated that P1,000 would be given to the
organization each year for the next 5 years, starting on December 31, 2012. Present
value factors at 6% for 5 periods are presented below.
Present Value of an ordinary annuity for 5 period at 6%.............. 4.2126

Present value of an annuity due for 5 periods at 6%....................... 4.46511
For the year ended December 31, 2011, Faith Heaven should report, on its statement
of activities.
a. Unrestricted revenues P5,000.

b. Temporarily restricted revenues of P4, 465
c. Unrestricted revenues of P1,465
d. Temporarily restricted revenues of P4,212 (AICPA)
78. A statement of functional expenses is required for which one of the following private
non profit organizations?
a. Colleges
b. Hospitals
c. Voluntarily health and welfare organizations
d. Performing arts organization
(AICPA)
Other Non-for-profit Organization:
79. In 2011, the board of trustees of Ayala Foundation designated P100,000 from its
current funds for college scholarship. Also in 2011, the foundation receive a bequest
of P200,000 from an estate of benefactor who specified that the bequest was to be
used for hiring teachers to tutor handicapped students. What amount should be
accounted for as current restricted funds?
a. P 0 c. P200,000
b. P100,000 d. P300,000
(AICPA)
80. On January 2, 2011, a nonprofit botanical society received a gift of an exhaustible

fixed asset with an estimated useful life of 10 years and no salvage value. The
donor’s cost of his asset was P20,000, and its fair market value at the date of the gift
was P30,oo. What amount of depreciation of this assets should the society recognize
in its 2011 financial statements?
a. P3000
b. 2500
c. 2000
d. 0
(AICPA)
81. Royal Anchor, a community foundation, incurred P5000 in management and general
expenses during 2011. In Royal Anchor statement of operation and changes in net
assets for the year ended December 31, 2011, the P5,000 should be reported as
a. A contra account offsetting revenue and support.

b. Part of program services.
c. Part of supporting services.
d. A direct reduction of fund balance.
(AICPA)
82. The following expenditure were made by Green Community, a society for the
protection of the environment
Printing of the annual report……………………………………………… P12,000

Unsolicited merchandise sent to encourage contributions…… 25,000
Cost of an audit performed by a CPA firm……………………………. 3,000
What amount should be classified as fund-raising costs in the society’s activity

statement?
a. P37,000
b. 28,000
c. 25,000
d. 0
(AICPA)
83. In April 2011, mal Lush donated P100,000 cash to her church, with the stipulation
that the income generated from this gift is to be paid to Mal Lush during her lifetime.
The conditions of this donation are that, after mal Lush dies, the principal can be
used by the church for any purpose voted on by the church elders. The church
received interest of P8,000 on the P100,000 for the year ended March 31, 2012, and
the interest was remitted to Mal Lush. In the church’s March 31,2012 financial
statement?
a. P8000 should be reported under support and revenue in the activity

statement.
b. P9,200 should be reported under support and revenue in the activity
statement.
c. P100,000 should be reported as support in the balance sheet.
d. The gift and its terms should be disclosed only in noted to the financial
statements.
(AICPA)
84. Seniors Associations is not-for-profit organization that provides services to senior

citizens. Seniors employs a full-time staff of 10 people at annual cost of P150,000. In
addition, two volunteers work as part time secretaries replacing last years’ full-time
secretary who earned P10,000. Services performed by the other volunteers for
special events had an estimated value of P15,000. These volunteers were employees
of local businesses and they received small-value items for their participation. What
amount should Seniors report for salary and wage expenses related to the above
items?
a. P150,000
b. 160,000
c. 165,000
d. 175,000
(AICPA)
85. The League, not-for-profit organization received the following pledges:
Unrestricted ……………………………………………………………………. P200,000

Restricted for the capital additions…………………………………… 150,000
All pledges are legally enforceable; however, the League’s experience indicates that
10% of all prove to be uncollectible. What amount should be League report as
pledges receivable, net of any required allowance account ?
a. P135,000
b. 180,000
c. 315,000
d. 350,000
(AICPA)
86. Tarsier Park, a zoological society, received contributions restricted for research
totaling P50,000 in 2011. Assume the P50,000 was not expensed in 2011. These
contributions were used to purchase P35,000 of research equipment in 2011. As a
result of these transactions, for the year ended December 31, 2011, Tarsier Park will
report, on its statement of activities, a
a. P15,000 increase in temporarily restricted net assets.

b. P50,000 increase in temporarily restricted net assets.
c. P35,000 increase in unrestricted net assets.
d. P15,000 increase in unrestricted net assets.
(AICPA)
87. On December 30, 2011, the board of Trustees of Eddie Museum designated
P4,000,000 of unrestricted net assets for the construction of an addition to its
building. What effect does its designation have on the museum’s unrestricted and
temporarily restricted net assets which are reports on the statement of financial
position (balance sheet at December 31, 2011)
Unrestricted Temporarily Restricted

Net assets net assets
a. No Effect increase
b. Decrease Increase
c. Decrease No effect
(AICPA)
88. Which of the following transactions would result in an increase in unrestricted net
assets for the year ended December 31, 2011?
I. A private not-for-profit hospital earned interest on investment; which

were board-designated.
II. A voluntarily health and welfare organization receives unconditional
promises to give (pledge) which will not be received until the
beginning of 2012. The donors placed no restrictions on their
donations.
a. Both I and II
b. I only
c. II only
d. Neither I nor II
(AICPA)
89. During 2011, Ms. Florendo a prominent art collector, donated several items in her
collection to the Davao Museum, a private, not-for-profit organization. Ms. Florendo
stipulated that her contribution be shown to the public, that it should preserved, and
not to be sold. Davao’s accounting policy is to capitalize all donations, what was the
effect of Ms. Florendo’s donation on Davao’s financial statement?
a. Temporarily restricted net increased.

b. Reclassifications caused a simultaneous increase in permanently restricted
assets and a decrease in temporarily restricted net assets.
c. There was no effect on any class davao’s net asset
d. Permanently restricted net assets increase.
(AICPA)
90. Hazel Botanical Gardens establishes a P500,000 quasi endowment on September 1,

2011. On the garden’s statement of financial position at December 31, 2011, the
assets in this quasi endowment should be included in which of the following
classifications?
a. Temporarily restricted net assets.

b. Unrestricted net assets.
c. Permanently restricted net assets.
d. Either temporarily or permanently restricted net assets depending on the
expected term of the quasi endowment.
(AICPA)
91. On December 30, 2011 Portal Museum, a not-for-profit organization, received a

P7,000,000 donation of Night Co., shares with donor-stipulated requirements as
follows:
 Shares valued at P5,000,000 are to be sold, with the proceeds used to
erect a public viewing building.
 Shares values at P2,000,000 are to be retained with the dividends
used to support current operations.
As a consequence of the receipt of the Night shares, how much should Portal report
as temporarily restricted net assets in the statement of financial position (balance
sheet)?
a. P0
b. 2,000,000
c. 5,000,000
d. 7,000,000
(AICPA)
92. On the statement of activities for a not-for-profit performing arts center expenses
should be deducted from
I. Unrestricted revenues.
II. Temporarily restricted revenues.
III. Permanently restricted revenues.
a. I, II, and III

b. Both I and II
c. I only
d. II only
(AICPA)
93. Save the Earth, a research organization received a P500,000 contribution from Ms.
Basilio stipulated that her donation be used to purchase new computer equipment
for save the Earth research staff, the contribution was received in August 31, 2011,
the P500,000 contribution should be reported by Save the Earth on its
a. Statement of activities as unrestricted revenue

b. Statement of activities as deferred revenue
c. Statement of activities as temporarily restricted revenue.
d. Statement of financial position as deferred revenue.
(AICPA)
94. The statement of finacial position (balance sheet) for Lovers Library should report
separate peso amounts for the Library's net assets according to which of the
following classification?
a. Unrestricted and permanently restricted.

b. temporarily restricted and permanently restricted.
c. Unrestricted qnd temporarily restricted.
d. Unrestricted, temporarily restricted, and permanently restricted.
(AICPA)
92. Manila Museum has both regular and term endowments. On the museums statement of
financial position ( balance sheet), how should the net assets of each type of endowment be
reported?
Term endowment Regular endowment

a. Temporarily restricted Permanently restricted
b. Permanently restricted permanently restricted
C. Unrestricted temporarily restricted
D. Temporarily restricted temporarily restricted
(AICPA)
93. For Ever Light, a religious organization, net assets which can be separated in
accordance with the wishes of the governing board of the organizations should be reported
as
I. Urestricted
II. Temporarily restricted
III. Permanently Restricted
a. I only
b. Both I and II.
c. I, II and III
d. I or II
(AICPA)
94. Tau Gamma, a fraternal organization, should prepare a statement of financial position
and which of the following financial statements?
I. Statement of activities.
II. statement of changes in fund balances.
III. Statement of each flows.
a. I, II, and III

b. III only
c. II and III
d. Both I and III
(AICPA)
95. Appari Broadcasting Station should recognize contributed services on its statement of
activities if which of the following conditions is (are) met?
I. The contributed services create or enhance nonfinancial assets.

II. The contributed services require specialized skills, are provided by individuals
possessing those skills, and would typically need to be purchsed if not provided by
donation.
a. Both I and II
b. Neither I nor II
C. I only
d. Either I or II
(AICPA)
96. The Requed family lost its home in fire. On December 25,2011, a philanthropist sent
money to the Mic Society, a not-for-profit organization, to purcahse furniture for the
Requed family. How should Mic report the receipt of the money in its 2011 finacial
statement?
a. As an unrestricted contribution.
b. As an temporarily restricted contribution
c. A a permanent restricted contribution.
d. As a liability.
(AICPA)
97. If the Quezon Museum, a not-for-profit organization received a contribution of historica

artifacts, it need not recognized the contribution it the artifacts are to be sold and the
proceeds used to
a. Support general museum activities.

b. Acquire other items for the collection.
c. Repair existing collections.
d. Purchase buildings to house collections.
(AICPA)
98. A storm broke glass windows in the building of Geod Meditation, a not-for-profit
organization. A member of Geod congregation, a professional glaizer, replaced the windows
at no charge. In Geod’s statement of activities the breakage and replacement of the window
should
a. Not be reported.
b. Be reported by note disclose only.
c. Be reported as increase in both expenses and contributions
d. Be reported as increase in both net assets and contributions.
(AICPA)
99. during the year ended December 31, 2011, the mars Foundation received the following
contribute services
I. Tamayo and Bonafe, attorneys-at-law, contributed their services which

involve advice related to the foundation’s regular endowment.
II. Senior citizens participated in the tethon to raise money for a new music
building.
Which of the these contributed services should included in unrestricted revenues,

gains, and other support on Mars Foundation’s Statement of activities for the year
ended December 31, 2011?
a. Both I and II
b. Neither I nor II
c. II only
d. I only
(AICPA)
100. On December 5, 2011, Bar Heating and Air Conditioning Services repaired the heating
system in building occupied by Pahiyas, a voluntary health and welfare organization. An
invoice of P1,500 was received by Pahiyas for the repairs on December 15, 2011. Bar
notified Pahiyas that the invoice was canceled and that repairs were being donated without
change. For the year ended December 31, 2011, how should pahiyas report the contributed
services?
a. Only in the notes to financial statements.

b. No disclosure is required either in the financial statements or in the notes.
c. As an increase in unrestricted revenues and as an increase in expenses on the
statements of activities.
d. As an increase in temporarily restricted net assets on the statement of activities.
(AICPA)
101. During the year ended December 31, 2011 a not-for-profit performing arts entity
received the following donor-restricted contribution and investment income:
I. Cash contribution on P100,000 to be permanently invested.

II. Cash dividends and interest of P6,000 to be used for the acquisition of theater
equipment.
As a result of these cash receipts, the statements of cash flows for the year ended December
31, 2011, would reported an increase of
a. P106,000 from operating activities.

b. P106,000 from the financing activities.
c. P6,000 from the operating activities and an increase of P100,000 from financing
activities.
d. P100,000 from operating activities and an increase of P6,000 from financing
activities.
(AICPA)
102. The Mahal Foundation, a not-for-profit organization, has the following cash
contributions nd expenditures in 2011.
 Unrestricted cash contributions of P500,000.

 Cash contributions of P200,000 restricted by the donor to the acquisition of
property.
 Cash expenditure of P200,000 to acquire property with the donation in the above
item.
Mahal statement of cash flows should include which of the following amounts?
Operating Investing Financing
Activities Activities Activities
a. P700,000 P(200,000) P0
b. 500,000 0 0
c. 500,000 (200,000) 200,000
d. 0 500,000 200,000
(AICPA)
103. Mild Care Center, Inc. a not-for-profit organization, receives revenue from various
sources during the year to support its dat care center. The following cash accounts were
received during 2011:
 P2,000 restricted by the donor to be used for meals for the children.
 P1,500 received for subcriptions to a monthly child care magazine with a fair market
value to subscribe of P1,000.
 P10,000 to be used only upon completion of a new playroom that was 75% complete
at December 31, 2011.
What amount should mild Care center record as contribution revenue in its 2011
Statement of Activities?
a. P2,000
b. 2,500
c. 10,000
d. 11,000
(AICPA)
1. What is the title of the revised government accounting system for national government agencies which
will be effective starting January 1, 2016?
a. Government Accounting Manual (GAM)
b. New Government Accounting System (NGAS)
c. Philippine Government Accounting System (PGAS)
d. National Government Accounting Manual (NGAM)
2. Under the Article IX-D Section 2 of the 1987 Constitution of the Republic of the Philippines, it shall have
the exclusive authority, subject to the limitations in this article, to define the scope of its audit and
examination, establish the techniques and methods required therefore, and promulgate accounting and
auditing rules and regulations, including those for the prevention and disallowance of irregular,
unnecessary, excessive, extravagant, or unconscionable expenditures, or uses of government funds
and properties. It shall also be responsible to keep the general accounts of the Government and, for
such period as may be provided by law, preserve the vouchers and other supporting papers pertaining
thereto.
a. Commission on Audit
b. Civil Service Commission
c. Commission on Election
d. Commission on Human Rights
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3. The Government Accounting Manual aims to update the following, except
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a. Standards, policies, guidelines and procedures in accounting for government funds and
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property
b. coding structure and accounts
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c. accounting books, registries, records, forms, and financial statements
d. scope and objectives of audit
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4. It encompasses the processes of analyzing, recording, classifying, summarizing and communicating all
transactions involving the receipt and disposition of government funds and property and interpreting the
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result thereof.
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a. Government auditing
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b. Government reporting
c. Government accounting
d. Government analyzing
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5. It refers to the financial plan of a government for a given period, usually for a fiscal year, which shows
what its resources are, and how they will be generated and used over the fiscal period.
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a. Government budget
b. Government financial position
c. Government financial statements
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d. Government financial performance

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6. It refers to the first step in the government budgetary processes wherein the President, through the
assistance of the Department of Budget and Management, shall prepare and submit to the Congress
within 30 days from the opening of regular session of Congress a budget of expenditures and sources
of financing, including receipts from existing and proposed revenue measures.
a. Budget Preparation
b. Budget Legislation or Authorization
c. Budget Execution
d. Budget Accountability
7. It refers to the second step in the government budgetary process which involves the statement by the
Congress of the General Appropriation Act (GAA) based on the budget submitted by the President
which cannot be increased by the Congress. The initiative for the enactment of the appropriation law
shall come from the House of Representatives.
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c. Budget Execution
8. It refers to the third step in the government budgetary process which involves that implementation of
the general appropriation act which includes the release of the revenue allotment under the supervision
of Department of Budget and Management
c. Budget Execution
9. It refers to the final step in the government budgetary process which involves the submission of proper
documentary reports by responsible officer, liquidation of expenditures and audit conducted by
Commission on Audit to ensure the public funds are spent in accordance with the appropriation act.
c. Budget Execution
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10. Under the Government Accounting (GAM), the financial reporting system of the Philippine government
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consists of accounting system on accrual basis and budget reporting system on budget basis under the
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statutory responsibility of the National Government Agencies (NGAs), Bureau of the Treasury (BTr),
Department of Budget and Management (DBM), and the Commission on Audit (COA). Which of the
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following is incorrect under the Government Accounting Manual?
a. Each entity of the National Government (NG) maintains complete set of accounting books by
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fund cluster which is reconciled with the records of cash transactions maintained by BTr.
b. The BTr accounts for the cash, public debt and related transactions of the NG.
c. Each entity maintains budget registries which are reconciled with the budget records
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maintained by the DBM and the Government Accountancy Sector (GAS), COA.
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d. Each entity maintains Regular Agency (RA) Books and National Government (NG) books for
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the recording of its transactions.
11. The General Accounting Manual enumerates the following components of the General Purpose
Financial S statements of Financial Statements of National Government Agencies, except
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a. Statement of Financial Position

b. Statement of Financial Performance
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c. Statement of Ratained Earnings

d. Statement of Cash flow
e. Statement of Changes in Net Assets/Equity
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f. Statement of Comparison of Budget and Actual Amounts

g. Notes to the Financial Statements, comprising a summary of significant accounting policies
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and other explanatory notes.
12. The books of accounts of National Government Agencies under the GAM shall consist of the following
except
a. General Journal
b. Cash Receipt Journal
c. Cash Disbursement Journal
d. Regular Agency and National Government Books
e. Check Disbursement Journal
f. General Ledgers
g. Subsidiary Ledgers
13. The registries of National Government Agencies under the GAM shall consist of the following except
a. Registries of Revenue and other Receipts (RROR)
b. Registry of Appropriations and Allotments (RAPAL)
c. Registries of Allotments, Obligations and Disbursement (RAOD)
d. Registries of Budget, Utilization and Disbursements (RBUD)
e. Registries of Priority Development Assistant Program (RPDAP)
14. It refers to the registry maintained by NGA unit to monitor the revenue and other receipts
estimated/budgeted, collected and remitted/deposited.
15. It refers to the registry maintained by NGA unit to show the original, supplemental and final budget for the
year and all allotments received charged against the corresponding appropriation.
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16. It refers to the registry maintained by NGA unit to show the allotments received for the year, obligations
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incurred against the corresponding allotment and the actual disbursement made.
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17. It refers to the registry maintained by NGA unit to record the approved special budget and the
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corresponding utilizations and disbursement charged to retained income authorized under the law and other
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retained income collection of national government agency with similar authority.

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18. The following are the classifications of different RAPAL, RAOD and RBUD, except
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a. RAPAL/RAOD/RBUD – Personal Services

b. RAPAL/RAOD/RBUD – Maintenance and other Operating Expenses
c. RAPAL/RAOD/RBUD – Financial Expenses
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d. RAPAL/RAOD/RBUD – Capital Outlays

e. RAPAL/RAOD/RBUD – Noncash Expenses
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19. Which of the following statements concerning the period of validity of Notice of Cash Allocations (NCAs) is
incorrect?
a. NCA issued and credited to the Regular MDS Sub-Accounts of Agencies/OUs for their
regular operations, shall be valid until the last working day of 3rd month of that quarter
pursuant to DBM Circular Letter (CL) No. 2013-12.
b. NCA issued and credited to the Special MDS Accounts of Agencies specifically for payment
of RGITL benefits shall be valid until the last working day o the following month when the NCA
was issued, except when issued in December, pursuant to DBM Budget Circular No. 2013-1
c. NCA issued for trust receipts and credited to the Trust MDS Account of Agencies shall be
valid until the last working day of the year.
d. NCA issued to the BTr for working funds of agencies shall be valid until the last working day
of the year.
e. NCA, regardless of source, shall be valid only for a period of 1-month from the date of
receipt.
20. On December 31, 2018, the Department of Finance billed its lessee on one of its building in the amount of
P10,000. On January 31, 2019, the Department of Finance collected all of the accounts receivable. On
February 28, 2019, the Department of Finance remitted the entire collected to the Bureau of Treasury. What is
the Journal Entry to record the remittance by the Department of Finance to the Bureau of Treasury?
a. Debit – Accounts Receivable P10,000 and Credit – Rent Income P10,000
b. Debit – Accounts Receivable P10,000 and Credit – Retained Earnings P10,000
c. Debit – Cash collecting officers P10,000 and Credit – Accounts Receivable P10,000
d. Debit – Cash- Treasury/Agency Deposit, Regular – P10,000 and Credit Cash – Collecting
officer – P10,000
21. On January 1, 2018, the Department of Public Works and Highways (DPWH) received a P10,000,000
appropriation from the national government for the acquisition of machinery. On February 1, 2018, DPWH
received the allotment from the Department of Budget and Management. On March 1, 2018, DPWH entered
into a contract with CAT Inc. for the acquisition of the machinery with a price of P8,000,000. On April 1, 2018,
DPWH received the Notice of Cash Allocation from the Department of Budget and Management net of 1%
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withholding tax for income tax of supplier and 5% withholding of Final tax on VAT of supplier. On May 1 , 2018,
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CAT Inc. delivered the machinery to DPWH. On June 1, 2018, DPWH paid the obligation to CAT Inc. On July 1,
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2018, DPWH remitted the withheld income tax and final VAT to BIR.
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What is the journal entry on March 1, 2018?
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a. No entry but just posting to appropriate RAPAL
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b. No entry but just posting to appropriate RAPAL and RAOD
c. No entry but just posting of ORS (Obligation Request and Status) to appropriate RAOD
d. Debit Machinery P8,000,000 and credit Accounts Payable P8,000,000
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22. Using the data on number 21, what is the journal entry on April 1, 2018?
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a. Debit Cash- MDS, Regular P7,520,000 and Credit Subsidy Income from National
Government
P7,520,000.
b. Debit Machinery P8,000,000 and Credit Accounts Payable P8,000,000
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c. Debit Accounts Payable P8,000,000 and Credit Due to BIR P480,000 and Cash –MDS,
Regular P7,520,000.
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d. Debit Due to BIR P480,000 and Credit Subsidy Income from the National Government
P480,000
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23. The salary accountant of DENR provided the following data concerning the salaries of its officers and
Employees for the month ended December 31, 2016:
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Salaries and wages P510,000

Personal Economic Relief Allowance (PERA) 55,000
Gross Compensation 565,000
Withholding income tax 51,000
GSIS 15,300
PAG-IBIG 10,200
Philhealth 510
Net P487,990
DENR received the notice of cash allocation from the DBM net of 10% tax on basic salary. Afterwards,
DENR granted cash advance to the cashier for the payroll. Afterwards, the DENR cashier paid the employees
and submitted liquidation report of the payroll fund with the corresponding supporting documents. Afterwards,
DENR remitted the withheld tax to BIR and withheld contribution to GSIS, PAG-IBIG and Philhealth.
What is the journal entry to recognize grant of cash advance to the cashier for the payroll?
a. Cash – MDS, Regular 508,500
Subsidy Income from National Government 508,500
b. Salaries and Wages Regular 510,000
PERA 55,000
Due to BIR 51,000
Due to GSIS 15,300
Due to PAG-IBIG 10,200
Due to Philhealth 510
Due to officers and employees 487,990
c. Advances for payroll 487,990
Cash – MDS, Regular 487,990
d. Due to officers and employees 487,990
Advances for payroll 487,990
e. Due to GSIS 15,300
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24. Department of Health (DOH) received Notice of Cash Allocation in the amount of P100,00 from the
er as
Department of Budget and Management. DOH made a total cash disbursement in the amount of P95,000.
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What is the journal entry to recognize reversion of unused Notice of Cash Allocation by DOH in its books?
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a. Debit Subsidy Income from the National Government P5,000 and credit Cash-MDS, Regular P5,000.
b. Debit Retained Earnings of DFA P5,000 and credit Cash – MDS, Regular P5,000
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c. Debit Expenses of DFA of P5,000 and credit Cash-MDS, Regular P5,000
d. Debit Investment of DFA P5,000 and credit Cash- MDS, Regular P5,000.
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25. Which of the following closing entries in the accounting book of Department of Tourism is incorrect if the
following data are provided by its chief accountant?
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Total Income, aside from SING P1,598,000

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Total Expenses 791,652

Total Subsidy Income from National Government 1,181,882
a. Income account other than SING 1,598,000

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Revenue and Expense Summary Account 1,598,000

b. Revenue and Expense Summary Account791,652
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Expense Account 791,652

c. Subsidy Income from National Government 1,181,882
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d. Revenue and Expense Summary Account1,988,230

Accumulated Surplus/(Deficit) 1,988,230
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e. Ordinary shares 3,931,534

Share Premium 3,931,534
26. On January 31, 2016 the collecting officer of Bureau of Customs collected P350,000 import duties plus
fines of P10,000 on the goods of an importer. On February 28, 2016, the Bureau of Customs remitted the
P350,000 to the Bureau of Treasury. What is the journal entry to record the collection of the import duties?
a. Debit Cash-Collecting Officer P360,000 and Credit Import duties P350,000 and fines/Penalties
P10,000
b. Debit Cash-Treasury/Agency Deposit, Regular P360,000 and Credit Cash-Collecting Officer
P360,000
c. Debit Cash-Treasury/Agency Deposit, Regular P360,000 and Credit Import duties P350,000 and
fines/Penalties P10,000.
27. Using the same data in number 26, but assuming the importer directly deposited the 350,000 import duties
and P10,000 fines through Authorized Agent Banks instead of collection by a customer collecting officer, what
is the journal entry to record the collection/remittance of import duties to Bureau of Treasury?
P10,000
P360,000
28. The Bureau of Treasury received P20,000 cash remittance from Department of Agrarian Reform (DAR)
from its miscellaneous income. What is the journal entry of the Bureau of Treasury in its accounting books to
record the receipt of cash remittance from the income of a national government agency?
a. Debit Cash in Bank, Local Bank P20,000 and Credit Cash-Treasury/Agency Deposit, Regular
P20,000
b. Debit Cash in Bank, Local Bank P20,000 and Credit Miscellaneous Income of DA P20,000
c. Debit Cash in Bank, Local Bank P20,000 and Credit Savings of DA, Regular P20,000
d. Debit Cash in Bank, Local Bank P20,000 and Credit Cash-Collecting Officer, DA P20,000.
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29. The Department of National Defense obtained a loan from Asian Development Bank to finance the
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acquisition of Philippine’s first aircraft carrier. The principal of the loan is $1B. What is the journal entry in the
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accounting book of Bureau of Treasury to record the receipt of loan proceeds based on credit advice from
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BSP?
a. Debit Cash in Bank, Local Bank or BSP $1B and Credit Cash-Treasury/Agency Deposit, Regular
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$1B.
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b. Debit Cash in Bank, Foreign Currency BSP $1B and credit Loans Payable-Foreign $1B.
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c. Debit Cash in Bank, Foreign Currency BSP $1B and Credit Subsidy income From Asian
Development Bank $1B.
d. Debit Cash in Bank, Foreign Currency BSP $1B and Credit Capital Account, ADB $1B.
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30. On February 1, 2016, the Department of Health received $10M cash from PLDT for medical expenses of
v i y re
victims of calamities. The collection of the P10M donation is considered as authorized special account. DOH
remitted the donation to the Bureau of Treasury on March 1, 2016. What is the journal entry on March 1, 2016
in the accounting book of DOH?
a. Debit Cash-Collecting Officer $10M and Credit Medical Fees $10M
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b. Debit Cash-Treasury/Agency Deposit, Special Account $10M and Credit Cash-Collecting Officers
$10M.
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c. Debit Cash in Bank-Local Currency, Savings Account $10M and Credit Cash-Treasury/Agency
Deposit, Special Account $10M
d. Debit Cash-Collecting Officer $10M and Credit Medical Fees $10M
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31. On September 1, 2016 $10M donation is deposited directly by United Nations World Health Organization to
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the Bureau of Treasury to help the Philippine government battle Zika Virus. What is the journal entry in the
accounting book of Bureau of Treasury to record the receipt of grants or donation from UN-WHO?
a. Debit Cash in Bank, Foreign Currency Savings Deposit $10M and Credit Income from grants and
Donations $10M.
b. Debit Cash-Collecting Officer $10M and Credit Income from grants and Donations $10M.
c. Debit Cash in Bank, Foreign Currency Savings Deposit $10M and Credit Loans Payable $10M.
d. Debit Cash-Collecting Officer $10M and Credit Ordinary Shares, UN WHO $10M
32. On February 1, 2016, the Department of Environment and National Resources (DENR) transferred
P450,000 fund to Department of Public Works and Highways (DPWH) for the construction of DENR’s irrigation
project. The 450,000 fund was then remitted by DPWH to Bureau of Treasury on May 1, 2016. The project was
completed and turned over by DPWH to DENR on October 31, 2016. What is the journal entry in DENR’s
book to record the transfer of funds on February 1, 2016?
a. Debit Due from DPWH P450,000 and Credit Cash, MDS, Regular P450,000
b. Debit Cash-Treasury/Agency Deposit/Trust P450,000 and Credit Cash-Collecting Officers P450,000
c. Debit Cash-Collecting Officers P450,000 and Credit Due to DENR P450,000
d. Debit Cash-Treasury/Agency Deposit/Trust P450,000 and Credit Cash-Collecting Officers P450,000
33. Using the same data in number 32, what is the journal entry of DPWH to record the turnover of irrigation
project to DENR on October 31, 2016?
a. Debit Due to DENR P450,000 and Credit PPE Account P450,000
b. Debit PPE Account P450,000 and Credit Due from DPWH P450,000
c. Debit Due to DENR P450,000 and Credit Cash-Collecting Officers P450,000
d. Debit Cash-Collecting Officer P450,000 and Credit Due from DPWH P450,000
END
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Powered by TCPDF (www.tcpdf.org)
1. What is the title of the revised government accounting system for national government agencies which
will be effective starting January 1, 2016?
a. Government Accounting Manual (GAM)
b. New Government Accounting System (NGAS)
c. Philippine Government Accounting System (PGAS)
d. National Government Accounting Manual (NGAM)
2. Under the Article IX-D Section 2 of the 1987 Constitution of the Republic of the Philippines, it shall have
the exclusive authority, subject to the limitations in this article, to define the scope of its audit and
examination, establish the techniques and methods required therefore, and promulgate accounting and
auditing rules and regulations, including those for the prevention and disallowance of irregular,
unnecessary, excessive, extravagant, or unconscionable expenditures, or uses of government funds
and properties. It shall also be responsible to keep the general accounts of the Government and, for
such period as may be provided by law, preserve the vouchers and other supporting papers pertaining
thereto.
a. Commission on Audit
b. Civil Service Commission
c. Commission on Election
d. Commission on Human Rights
3. The Government Accounting Manual aims to update the following, except

a. Standards, policies, guidelines and procedures in accounting for government funds and
property
b. coding structure and accounts
c. accounting books, registries, records, forms, and financial statements
d. scope and objectives of audit
4. It encompasses the processes of analyzing, recording, classifying, summarizing and communicating all
transactions involving the receipt and disposition of government funds and property and interpreting the
result thereof.
a. Government auditing
b. Government reporting
c. Government accounting
d. Government analyzing
5. It refers to the financial plan of a government for a given period, usually for a fiscal year, which shows
what its resources are, and how they will be generated and used over the fiscal period.
a. Government budget
b. Government financial position
c. Government financial statements
d. Government financial performance
6. It refers to the first step in the government budgetary processes wherein the President, through the
assistance of the Department of Budget and Management, shall prepare and submit to the Congress
within 30 days from the opening of regular session of Congress a budget of expenditures and sources
of financing, including receipts from existing and proposed revenue measures.
c. Budget Execution
7. It refers to the second step in the government budgetary process which involves the statement by the
Congress of the General Appropriation Act (GAA) based on the budget submitted by the President
which cannot be increased by the Congress. The initiative for the enactment of the appropriation law
shall come from the House of Representatives.
c. Budget Execution
8. It refers to the third step in the government budgetary process which involves that implementation of
the general appropriation act which includes the release of the revenue allotment under the supervision
of Department of Budget and Management
c. Budget Execution
9. It refers to the final step in the government budgetary process which involves the submission of proper
documentary reports by responsible officer, liquidation of expenditures and audit conducted by
Commission on Audit to ensure the public funds are spent in accordance with the appropriation act.
c. Budget Execution
10. Under the Government Accounting (GAM), the financial reporting system of the Philippine government
consists of accounting system on accrual basis and budget reporting system on budget basis under the
statutory responsibility of the National Government Agencies (NGAs), Bureau of the Treasury (BTr),
Department of Budget and Management (DBM), and the Commission on Audit (COA). Which of the
following is incorrect under the Government Accounting Manual?
a. Each entity of the National Government (NG) maintains complete set of accounting books by
fund cluster which is reconciled with the records of cash transactions maintained by BTr.
b. The BTr accounts for the cash, public debt and related transactions of the NG.
c. Each entity maintains budget registries which are reconciled with the budget records
maintained by the DBM and the Government Accountancy Sector (GAS), COA.
d. Each entity maintains Regular Agency (RA) Books and National Government (NG) books for
the recording of its transactions.
11. The General Accounting Manual enumerates the following components of the General Purpose
Financial S statements of Financial Statements of National Government Agencies, except
a. Statement of Financial Position
b. Statement of Financial Performance
c. Statement of Ratained Earnings
d. Statement of Cash flow
e. Statement of Changes in Net Assets/Equity
f. Statement of Comparison of Budget and Actual Amounts
g. Notes to the Financial Statements, comprising a summary of significant accounting policies
and other explanatory notes.
12. The books of accounts of National Government Agencies under the GAM shall consist of the following
except
a. General Journal
b. Cash Receipt Journal
c. Cash Disbursement Journal
d. Regular Agency and National Government Books
e. Check Disbursement Journal
f. General Ledgers
g. Subsidiary Ledgers
13. The registries of National Government Agencies under the GAM shall consist of the following except
e. Registries of Priority Development Assistant Program (RPDAP)
14. It refers to the registry maintained by NGA unit to monitor the revenue and other receipts
estimated/budgeted, collected and remitted/deposited.
15. It refers to the registry maintained by NGA unit to show the original, supplemental and final budget for the
year and all allotments received charged against the corresponding appropriation.
16. It refers to the registry maintained by NGA unit to show the allotments received for the year, obligations
incurred against the corresponding allotment and the actual disbursement made.
17. It refers to the registry maintained by NGA unit to record the approved special budget and the
corresponding utilizations and disbursement charged to retained income authorized under the law and other
retained income collection of national government agency with similar authority.
18. The following are the classifications of different RAPAL, RAOD and RBUD, except
a. RAPAL/RAOD/RBUD – Personal Services
b. RAPAL/RAOD/RBUD – Maintenance and other Operating Expenses
c. RAPAL/RAOD/RBUD – Financial Expenses
d. RAPAL/RAOD/RBUD – Capital Outlays
e. RAPAL/RAOD/RBUD – Noncash Expenses
19. Which of the following statements concerning the period of validity of Notice of Cash Allocations (NCAs) is
incorrect?
a. NCA issued and credited to the Regular MDS Sub-Accounts of Agencies/OUs for their
regular operations, shall be valid until the last working day of 3rd month of that quarter
pursuant to DBM Circular Letter (CL) No. 2013-12.
b. NCA issued and credited to the Special MDS Accounts of Agencies specifically for payment
of RGITL benefits shall be valid until the last working day o the following month when the NCA
was issued, except when issued in December, pursuant to DBM Budget Circular No. 2013-1
c. NCA issued for trust receipts and credited to the Trust MDS Account of Agencies shall be
valid until the last working day of the year.
d. NCA issued to the BTr for working funds of agencies shall be valid until the last working day
of the year.
e. NCA, regardless of source, shall be valid only for a period of 1-month from the date of
receipt.
20. On December 31, 2018, the Department of Finance billed its lessee on one of its building in the amount of
P10,000. On January 31, 2019, the Department of Finance collected all of the accounts receivable. On
February 28, 2019, the Department of Finance remitted the entire collected to the Bureau of Treasury. What is
the Journal Entry to record the remittance by the Department of Finance to the Bureau of Treasury?
a. Debit – Accounts Receivable P10,000 and Credit – Rent Income P10,000
b. Debit – Accounts Receivable P10,000 and Credit – Retained Earnings P10,000
c. Debit – Cash collecting officers P10,000 and Credit – Accounts Receivable P10,000
d. Debit – Cash- Treasury/Agency Deposit, Regular – P10,000 and Credit Cash – Collecting
officer – P10,000
21. On January 1, 2018, the Department of Public Works and Highways (DPWH) received a P10,000,000
appropriation from the national government for the acquisition of machinery. On February 1, 2018, DPWH
received the allotment from the Department of Budget and Management. On March 1, 2018, DPWH entered
into a contract with CAT Inc. for the acquisition of the machinery with a price of P8,000,000. On April 1, 2018,
DPWH received the Notice of Cash Allocation from the Department of Budget and Management net of 1%
withholding tax for income tax of supplier and 5% withholding of Final tax on VAT of supplier. On May 1 , 2018,
CAT Inc. delivered the machinery to DPWH. On June 1, 2018, DPWH paid the obligation to CAT Inc. On July
1, 2018, DPWH remitted the withheld income tax and final VAT to BIR.
What is the journal entry on March 1, 2018?
a. No entry but just posting to appropriate RAPAL

b. No entry but just posting to appropriate RAPAL and RAOD
c. No entry but just posting of ORS (Obligation Request and Status) to appropriate RAOD
d. Debit Machinery P8,000,000 and credit Accounts Payable P8,000,000
22. Using the data on number 21, what is the journal entry on April 1, 2018?
a. Debit Cash- MDS, Regular P7,520,000 and Credit Subsidy Income from National
Government
P7,520,000.
b. Debit Machinery P8,000,000 and Credit Accounts Payable P8,000,000
c. Debit Accounts Payable P8,000,000 and Credit Due to BIR P480,000 and Cash –MDS,
Regular P7,520,000.
d. Debit Due to BIR P480,000 and Credit Subsidy Income from the National Government
P480,000
23. The salary accountant of DENR provided the following data concerning the salaries of its officers and
Employees for the month ended December 31, 2016:
Salaries and wages P510,000
Personal Economic Relief Allowance (PERA) 55,000
Gross Compensation 565,000
Withholding income tax 51,000
GSIS 15,300
PAG-IBIG 10,200
Philhealth 510
Net P487,990
DENR received the notice of cash allocation from the DBM net of 10% tax on basic salary. Afterwards,
DENR granted cash advance to the cashier for the payroll. Afterwards, the DENR cashier paid the employees
and submitted liquidation report of the payroll fund with the corresponding supporting documents. Afterwards,
DENR remitted the withheld tax to BIR and withheld contribution to GSIS, PAG-IBIG and Philhealth.
What is the journal entry to recognize grant of cash advance to the cashier for the payroll?
a. Cash – MDS, Regular 508,500
Subsidy Income from National Government 508,500
b. Salaries and Wages Regular 510,000
PERA 55,000
Due to BIR 51,000
Due to GSIS 15,300
Due to officers and employees 487,990
c. Advances for payroll 487,990
d. Due to officers and employees 487,990
Advances for payroll 487,990
e. Due to GSIS 15,300
24. Department of Health (DOH) received Notice of Cash Allocation in the amount of P100,00 from the
Department of Budget and Management. DOH made a total cash disbursement in the amount of P95,000.
What is the journal entry to recognize reversion of unused Notice of Cash Allocation by DOH in its books?
a. Debit Subsidy Income from the National Government P5,000 and credit Cash-MDS, Regular P5,000.
b. Debit Retained Earnings of DFA P5,000 and credit Cash – MDS, Regular P5,000
c. Debit Expenses of DFA of P5,000 and credit Cash-MDS, Regular P5,000
d. Debit Investment of DFA P5,000 and credit Cash- MDS, Regular P5,000.
25. Which of the following closing entries in the accounting book of Department of Tourism is incorrect if the
following data are provided by its chief accountant?
Total Income, aside from SING P1,598,000

Total Expenses 791,652
Total Subsidy Income from National Government 1,181,882
a. Income account other than SING 1,598,000

b. Revenue and Expense Summary Account 791,652
Expense Account 791,652
c. Subsidy Income from National Government 1,181,882
d. Revenue and Expense Summary Account 1,988,230
Accumulated Surplus/(Deficit) 1,988,230
e. Ordinary shares 3,931,534
Share Premium 3,931,534
26. On January 31, 2016 the collecting officer of Bureau of Customs collected P350,000 import duties plus
fines of P10,000 on the goods of an importer. On February 28, 2016, the Bureau of Customs remitted the
P350,000 to the Bureau of Treasury. What is the journal entry to record the collection of the import duties?
P10,000
P360,000
27. Using the same data in number 26, but assuming the importer directly deposited the 350,000 import duties
and P10,000 fines through Authorized Agent Banks instead of collection by a customer collecting officer, what
is the journal entry to record the collection/remittance of import duties to Bureau of Treasury?
P10,000
P360,000
28. The Bureau of Treasury received P20,000 cash remittance from Department of Agrarian Reform (DAR)
from its miscellaneous income. What is the journal entry of the Bureau of Treasury in its accounting books to
record the receipt of cash remittance from the income of a national government agency?
a. Debit Cash in Bank, Local Bank P20,000 and Credit Cash-Treasury/Agency Deposit, Regular
P20,000
b. Debit Cash in Bank, Local Bank P20,000 and Credit Miscellaneous Income of DA P20,000
c. Debit Cash in Bank, Local Bank P20,000 and Credit Savings of DA, Regular P20,000
d. Debit Cash in Bank, Local Bank P20,000 and Credit Cash-Collecting Officer, DA P20,000.
29. The Department of National Defense obtained a loan from Asian Development Bank to finance the
acquisition of Philippine’s first aircraft carrier. The principal of the loan is $1B. What is the journal entry in the
accounting book of Bureau of Treasury to record the receipt of loan proceeds based on credit advice from
BSP?
a. Debit Cash in Bank, Local Bank or BSP $1B and Credit Cash-Treasury/Agency Deposit, Regular
$1B.
b. Debit Cash in Bank, Foreign Currency BSP $1B and credit Loans Payable-Foreign $1B.
c. Debit Cash in Bank, Foreign Currency BSP $1B and Credit Subsidy income From Asian
Development Bank $1B.
d. Debit Cash in Bank, Foreign Currency BSP $1B and Credit Capital Account, ADB $1B.
30. On February 1, 2016, the Department of Health received $10M cash from PLDT for medical expenses of
victims of calamities. The collection of the P10M donation is considered as authorized special account. DOH
remitted the donation to the Bureau of Treasury on March 1, 2016. What is the journal entry on March 1, 2016
in the accounting book of DOH?
a. Debit Cash-Collecting Officer $10M and Credit Medical Fees $10M
b. Debit Cash-Treasury/Agency Deposit, Special Account $10M and Credit Cash-Collecting Officers
$10M.
c. Debit Cash in Bank-Local Currency, Savings Account $10M and Credit Cash-Treasury/Agency
Deposit, Special Account $10M
d. Debit Cash-Collecting Officer $10M and Credit Medical Fees $10M
31. On September 1, 2016 $10M donation is deposited directly by United Nations World Health Organization to
the Bureau of Treasury to help the Philippine government battle Zika Virus. What is the journal entry in the
accounting book of Bureau of Treasury to record the receipt of grants or donation from UN-WHO?
a. Debit Cash in Bank, Foreign Currency Savings Deposit $10M and Credit Income from grants and
Donations $10M.
b. Debit Cash-Collecting Officer $10M and Credit Income from grants and Donations $10M.
c. Debit Cash in Bank, Foreign Currency Savings Deposit $10M and Credit Loans Payable $10M.
d. Debit Cash-Collecting Officer $10M and Credit Ordinary Shares, UN WHO $10M
32. On February 1, 2016, the Department of Environment and National Resources (DENR) transferred
P450,000 fund to Department of Public Works and Highways (DPWH) for the construction of DENR’s irrigation
project. The 450,000 fund was then remitted by DPWH to Bureau of Treasury on May 1, 2016. The project was
completed and turned over by DPWH to DENR on October 31, 2016. What is the journal entry in DENR’s
book to record the transfer of funds on February 1, 2016?
a. Debit Due from DPWH P450,000 and Credit Cash, MDS, Regular P450,000
b. Debit Cash-Treasury/Agency Deposit/Trust P450,000 and Credit Cash-Collecting Officers P450,000
c. Debit Cash-Collecting Officers P450,000 and Credit Due to DENR P450,000
d. Debit Cash-Treasury/Agency Deposit/Trust P450,000 and Credit Cash-Collecting Officers P450,000
33. Using the same data in number 32, what is the journal entry of DPWH to record the turnover of irrigation
project to DENR on October 31, 2016?
a. Debit Due to DENR P450,000 and Credit PPE Account P450,000
b. Debit PPE Account P450,000 and Credit Due from DPWH P450,000
c. Debit Due to DENR P450,000 and Credit Cash-Collecting Officers P450,000
d. Debit Cash-Collecting Officer P450,000 and Credit Due from DPWH P450,000
END
***MODULE 2***
Audit for Not-for-Profit Organizations –

Hospitals (Health Care Providers),
Colleges and Universities, Voluntarily
Health and Welfare Organization and
Other Not-for-Profit Organization
The other school of thought believes that fund accounting, as it is currently practiced, will remain
in vogue. The advantage of fund accounting was extolled from the legal point of view and form a
management control viewpoint. The advocates of this thought believe that funds have legal
restrictions or discretionary restrictions, and accordingly, they must be segregated between
“restricted” and “unrestricted” funds.
The international accounting unit for many not-for-profit organizations is the fund, which is
defined as a fiscal and accounting entity with a self-balancing set of accounts recording cash and
other financial resources with all related liabilities and residual equities, or balances, and changes
therein which are segregated for the purpose of carrying on specific activities or attaining certain
objectives in accordance with special regulations, restrictions, or limitations: Different type of
funds is necessary to distinguish between assets that may be used as authorized by the board or
directors and assets whose use is restricted by donors. Funds commonly used by some of the not-
for-profit organizations covered in this chapter discussion were as follows:
 Unrestricted fund (sometimes called unrestricted current fund, general fund, or current
unrestricted fund)
 Restricted fund (sometimes called restricted current fund or current restricted fund)
 Endowment fund (pure or term endowment)
 Agency fund (sometimes called custodian fund)
 Annuity fund and life income fund (sometimes called living trust fund)
 Loan fund
 Plant fund (sometimes called land, building, and equipment fund)
Fund accounting has been used to organize and manage resources for various purposes in
accordance with regulations, restrictions, or limitations imposed by parties outside the institution,
or with discretions issued by the governing board. A clear distinction of funds that are externally
restricted and those that are internally designated by action of the governing board has been
maintained in the accounts and disclosed on the financial reports.
Accrual Basis of Accounting
All not-for-profit organizations accounting for revenues and expenses using the accrual basis of
accounting. It also requires not-for-profit organization that issue GAAP basis financial statements
recognize depreciation expense on long-lived assets. Depreciation should be recorded if the assets
are gifts or it arises because of donations. Works of art and historical treasures that meet the
definition of “collections” need to be capitalized or depreciated.
Financial Statements
Financial statements prepared in accordance with the present GAAP represent a shift away from
the fund reporting to an emphasis on the organization as a whole. The equity account fund
balance, has been replaced with term net assets. Under the present GAAP, it requires
classifications of the organization’s net assets based on the existence or absence of donor, imposed
restrictions.
The financial statements display three classes of net assets: unrestricted, temporarily restricted,
and permanently restricted. Any changes of these three classes of net assets must be reported.
The financial statements are:
1. Statement of Financial Position (Balance Sheet) which will report organizations-wide

total for assets, liabilities and net assets, and assets identified as unrestricted, temporarily
restricted, and permanently restricted.
2. Statement of Activities which reports revenues, expenses, gains, losses, and reclassification
or changes in the organization’s net assets or change in equity: permanently restricted,
temporarily restricted, and unrestricted. Minimum requirements are organization-wide
totals, changes in net assets for each class of assets, and all expenses recognized only in
the unrestricted classification. A display of a measure of operations in the statement of
activities is permitted.
3. Statement of Cash Flows with categories (operating, financing, and investing) similar to
regular business enterprises.
4. Notes to the Financial Statements, they are accompanying notes to the above statements
necessary for disclosure purposes.
Classification of Net Assets
The Financial Statements reporting requirements are based on a division of net assets into three
classifications. These classes of net assets are totally dependent on the existence or absence of
donor-imposed restrictions. The three classes of net assets are:
1. Permanently restricted net assets are the portion of net assets whose use is limited by
donor-imposed stipulations that do not expire and cannot be removed by action of the
not-for-profit entity.
2. Temporarily restricted net assets are the portion of net assets whose use is limited by
donor-imposed stipulations that either expire (time restrictions) or can be removed by the
organization fulfilling the stipulations (purpose restrictions).
3. Unrestricted net assets are the portion of net assets that carry no donor-imposed
stipulations.
The organization’s net assets, revenues, expenses, gains, and losses are classified according to
the three classes of net assets. This division of net assets into permanently restricted, temporarily
restricted, and unrestricted classifications is the focal point in presenting financial statement for
not-for-profit entities. Revenues, gains, and losses can be reported in each net asset class, but
expenses are reported only in unrestricted net assets class.
Accounting for Hospitals
Hospitals depend its large part on donations and grants, which often came with restrictions. Fun
accounting is required for hospitals in order to maintain accountability over restricted resources.
Hospitals will use normal accrual accounting methods, including the classification of costs as
expenses rather than expenditures, and will not record budgetary accounts or encumbrances on
the books.
Types of Funds
In general there are two types of funds used by a hospital:
1. General (unrestricted) Fund – account for all resources of the hospital which are not
subject to outside restrictions. They are used for day-to-day operations. Note that board-
designated funds are unrestricted. Designation is an eternal process which can be altered
at the discretion of the Board of Trustees of the hospital. Restrictions are externally
imposed and not subject to alteration by the board. Items in this category includes:
a. Assets who use is limited include assets set aside by the governing board for
identified purpose.
b. Agency Funds are included in the General Funds as both an asset and a liability.
They are used to account for fees collected as an agent of physicians who have
private-practice patients coming to hospital offices provide to the staff physicians.
c. Property and equipment used for general operations, and the related liabilities.
Property plant and equipment whose use is restricted are reported in the donor-
restricted fund.
2. Donor-Restricted Funds – accounts for temporarily restricted and permanently restricted

resources. This class is subdivided into:
a. Temporary Restricted Fund may be a specific purpose fund, a term endowment fund,
or a plant replacement and expansion fund. An annuity and life income fund may also
be included
a.1. Specific Purpose Fund is a restricted fund used by health care providers to
account for principal and income in accordance with donor’s specified restrictions.
a.2. Endowment Fund is used by hospital to account for a trust where the principal
must be kept intact and the income be expanded for either current operations or
a specific purpose in accordance with grantor’s wishes. An endowment may be
in perpetuity, or it may be fixed term or until a specific event occurs.
a.3. Plant Replacement and Expansion Fund is a restricted fund used by hospitals
and other health care providers to account for donor’s contributions that must
be used to acquire property, plant and equipment.
b. Permanently Restricted Fund is also an endowment fund but differs from a term-
endowment fund is that the principal must be maintained intact in perpetuity and only
the income may be used in accordance with the donor’s wishes.
Accounting for Revenues and Expenses
Revenues and Gains

1. Patient Service Revenue include room and board, nursing services, and other
professional service revenues typically are recorded at established (gross) rates as the
services are provided but are reported net of amounts that are considered deductions
from revenues. The objective is to report the amount that the hospital is entitled to collect
as patient service revenues.
Charity care services provided of free of charge to patients who qualify under a hospital’s
charity care policy – are excluded from both gross and net patient service revenues.
According to AICPA Audit Guide and Accounting Guide, Health Care Organization;
“Charity care cases does not qualify for recognition as receivables or revenues in the
financial statements”.
If further states that:

“Management’s policy for providing charity care, as well as the level of charity
care provided, should be disclosed in the financial statements… Such disclosure
generally is made in the notes to the financial statement and is measured based on
the provider’s rates, costs units of service, or other statistical measure.”
Allowance accounts are used to reduce receivables for estimated deductions from
revenues, as well as estimated doubtful accounts. Deductions from revenues include:
a. Courtesy allowances – discounts to doctors and employees.

b. Contractual adjustments – discounts arranged with third-party payors
(PhilHealth for example) that frequently have agreements to reimburse at less-
than-established rates.
2. Premium Fees also known as subscriber fees or capitation fees, are revenues from
agreements which a hospital provides any necessary patient services (perhaps from a
contractually established list of services) for a specific fee. The fee is usually a specific
fee for member per month. The fees are earned whether the standard charges for services
actually rendered are more or less than the amount of the fee – i.e., without regard to
services actually provided in the period. Therefore, they are reported separately from
patient separately form patient service revenues. This is a growing portion of hospital
revenues in many hospitals.
3. Other Operating Revenues includes revenues from services to patients other than for
health care and revenues from sales and services provided from non-patients. This
classification might include tuition from schools operated by the hospital, rentals of
hospital space, charges for preparing and reproducing medical records room charges for
telephone calls and television, proceeds from cafeterias, gift shops, snack bars, donated
medicine, linen and office supplies, etc.
The control account Nonoperating revenues records revenue not related directly to an
entity’s principal operations. These items are primarily financial in nature and include
unrestricted and donor-restricted pledges, gifts or grants, unrestricted income from
endowment funds, maturing term endowment fund, income and pain from investments,
gains on sale or hospital property. Investments are reported at fair value with both
realized and unrealized gains include as part of nonoperating revenue.
Note: the Other Operating Revenue and Nonoperating Revenue can be lump as one
account and be called, as Other Revenue and Gains.
Classification of Operating Expenses
Operating expenses of hospitals are reported on an accrual basis and normally include functional
categories for nursing services (medical and surgical, intensive care, nurseries, operating rooms),
other profession services (laboratories, radiology, anesthesiology, pharmacy), general services
(housekeeping, maintenance, laundry), fiscal services (personnel, purchasing, insurance,
governing board), interest and deprecation provisions.
Although accounts are maintained for employee and contractual allowances, these items are
not expenses. As stated earlier, they are revenue deductions that are subtracted from gross
patient service revenue to arrive at net patient service revenue reported in the statement of
operations.
Provision for bad debts is an expense. The difference between the charity care and bad debts
expense is that charity care results from the hospital’s policy or providing health care to
individuals who meet certain financial criteria, whereas, bad debts results from extendion credit.
Health care services provided as charity care were never intended to provide cash flows.
Accounting for Colleges and Universities
Colleges and Universities are required to use fund accounting due to the large amount of
restricted resources under their control. Accrual accounting is used, but there are certain
similarities to accounting by governmental funds, especially in the reporting of expenditures
rather than expenses.
Types of Funds
There are six different fund groups which may be used by a college or university. They include
current funds (unrestricted and restricted), loan funds, endowment and similar funds, annuity and
life income funds, plant funds, and agency funds. Funds are established as needed.
Current Funds
The current funds account for resources of the institution that will be used in carrying out the
primary objectives: instruction, research, extension, and public service. Unrestricted current
funds are not subject to outside restrains on usage, and restricted current funds have been
restricted by donors or grantors to specific purposes. As in the case of hospitals, resources
designated by the Board of Trustees are still considered unrestricted, since they lack externally-
Loan Funds
Loans funds are established for resources that are to be loaned to students, faculty or staff. The
loan fund is not for loans, notes, or bonds payable to others. It is designed to hold assets, not
liabilities. Fund balances should separately report restricted and unrestricted amounts. Restricted
amounts represents resources which outside parties provided to the university on condition it will
be used for loans. Unrestricted fund balances represent resources which were placed in the loan
fund at the election of the university itself.
Endowment and Similar Funds
Endowment funds are resources which outside parties contributed to the university on condition
they not be spent, but invested to yield earnings which may be spent. Term endowment funds
may be spent after a specific period of time has passed or a certain event has occurred. Quasi-
endowment funds aren’t actually restricted, but have been designated by the board of the
university to be retained and invested.
Occasionally, a donor will establish an endowment fund, but place the funds with an independent
trustee, who will remit earnings to the university on a regular basis. Since the fund principal is
not under the control of the university, it will not account for it, but simply note the arrangement
by memorandum and in the notes to be the financial statements.
Annuity and Life Income Funds
Annuity funds are resources given to the university on condition that regular payments be made
to a specific person for a certain period of time, after which all principal is available to the
institution. Life income funds require distribution of all earnings to a specified person, upon
whose death the balance becomes expendable by the university.
Plant Funds
All of the assets and liabilities associated with fixed assets of a university are accounted for in
the plant fund. The fund plant balances include (1) unexpended plant funds, (2) funds for
renewals and replacements, (3) funds for retirement of indebtedness, and (4) investment in plant.
Unexpected plant funds contain liquid assets which are to be used to acquire new plant assets in
the future. Funds for renewals and replacements contain liquid assets which are to be used to
replace existing plant assets as needed. Funds for retirement of indebtedness contain resources to
be used to make principal and interest payments on debts incurred to acquire plant assets.
Investment in plant consist of the fixed assets themselves and any long-term debt issued in
connection with acquisitions of these assets.
The fund balances of the first three funds should be subdivided further into restricted and
unrestricted balances, based on whether classification in the plant fund is the result of external
requirements or internal designation. The investment in plant fund balance isn’t subdivided.
Agency Funds
Resources received by the institution which belong to others, such as student body fees, are held
in agency funds, with a liability equal to the assets collected. There is never any fund balance in
agency funds, since all assets held are owed to others.
Revenues include tuition and fees; government appropriations; government grants and contracts;
private gifts, grants, and contracts; endowment income; sales and services of educational
activities; sales and services of auxiliary enterprises (such as residence halls, food services,
intercollegiate athletics, and college stores); sales and services of hospitals (if operated by the
university); other sources (such as expired term endowments, annuities, and life income
agreements); and independent operations (such as government research laboratories).
Expenditures include educational and general expenditures, auxiliary enterprises, hospitals, and
independent operations.
Accounting for Voluntary Health and Welfare Organization and Other Not-for-Profit
Organizations
The FUNDS used by the VHWO include:
1. Current Fund – Unrestricted. This fund is used for operations that require only the
discretion of the organization’s board of directors, and include assets designated by the
board for specific purposes.
Revenues are recorded using the full accrual basis. A distinction should be made
between Public Support and Revenues.
Public support is the inflow of resources from voluntary donors who receive no direct,
personal benefit from the organization’s usual programs in exchange for their
contributions. They include the following:
1. Contributions
2. Special Events Support
3. Legacies and Bequests
4. Proceeds from fund raisers
Revenues are inflow of resources resulting from a charge for service from financial
activities or from other exchange transactions.
1. Membership Dues
2. Program Service Fees
3. Sales of Publications and Supplies for proceeds from the sales of these items
4. Investment Income e.g., interest dividends, and other earnings.
Expenses are classified as program services and supporting services and are reported on
a functional basis under these classifications.
Program services related to the expenses incurred in providing the organization’s

social service activities.
Supporting services consist of administrative expenses and fund-raising costs.
In reporting expenses in the statement of activities, the functional classifications might

appear as follows:
Expenses
Program services – it focus on social services.
Research
Public Education
Professional Education
Community Services
Supporting Services – it focuses on administration and fund-raising

activities.
Management and general
Fund-raising
Expenses are recorded on a full accrual basis in a manner similar to that used by
business organizations. Expenses are recorded in each fund that incurs the expenses.
2. Current Fund – Restricted. This fund is used for operations, but only in accordance
with a donor or grantor’s specifications.
Restricted pledges to be used to promote the adoption of handicapped children would be

recorded in this classification.
3. Land, Building, and Equipment Fund. This fund is used to account for:
a. Land, buildings, and equipment acquired by the organization;
b. Liabilities arising from the acquisition or improvement of plant assets;
c. Current assets restricted by donors or grantors for future disposition.
4. Endowment Fund. This fund is used to accounts for permanently restricted

endowment principal to be maintained intact either in perpetuity or until a specific event
occurs and temporary restricted term endowments.
5. Custodian Fund. A fund “establish to account for assets received by an organization to
be held or disbursed only on instructions of the person or organization from whom they
were received.” This fund is similar to agency fund of a college or university. The assets
do not belong to the organization.
Accounting Principles
Voluntary health and welfare organizations adhere to the accrual basis of accounting. Revenue
are generally recognized when earned and expenses are shown when the related services of the
organization are provided. Source and uses of funds are not merely classified as revenues and
expenses, however, but are instead broken down into categories.
 Donations of services should be charge to the appropriate expense with an offsetting
credit to support.
 Donated property should be recorded at fair market value on the date of the gift.
 Pledges should be recognized net of uncollectible amounts, and pledges or cash

donations that will not be spendable until a future period should be shown as a deferred
credit on the balance sheet.
Voluntary Health and Welfare Organization also must provide a Statement of Functional
Expenses. This statement reports expenses by both function (program and supporting) and by
their natural classification (salary expenses, depreciation expenses, etc.).
Other Not-For-Profit Organizations
A wide variety of other organizations have option of using fund accounting. Examples are
research and scientific organizations, social and country clubs, religious organizations, and
museums. A great deal of flexibility is permitted in the accounting for these organizations.
Financial Statements
All not-for-profit organizations, including voluntary health and welfare organizations, to prevent
three general-purpose financial statements. These include Statement of Financial Position, a
Statement of Activities, and a Statement of Cash Flows. In addition, voluntary health and welfare
organizations must present a Statement of Functional Expenses.
A statement of functional expenses has no parallel in business. This statement breaks down
each category of program and supporting expense by type of expense, such as salaries, supplies,
and depreciation. It provides details omitted from the statement of support, revenue and expenses
and changes in fund balances, which only lists expenses by function.
Statement of Financial Position
The statement of financial position is presented for the entire entity. Its purpose is to provide
relevant information about the organization’s assets, liabilities, and net assets. It should also
provide information about their relationships to each other as of the date of the statement.
Certain principles should be followed in preparing the statement of financial position. The focus
is in the entity as a whole and should report total assets, liabilities and net assets.
 Cash or other assets that have restrictions imposed by the donor, limiting the use of those
assets to long-term purposes should be segregated from other assets that are unrestricted.
 Net assets should be segregated into three classes within the statement. These will include
unrestricted, temporarily restricted, and permanently restricted net assets.
 The nature and timing of donor restrictions must be disclosed. Voluntary restrictions of
unrestricted net assets by the entity’s governing body, resulting in board-designated funds,
may be disclosed.
There are different types of restrictions that may be placed on assets.
Asset may be permanently restricted.
 An example may be a donor-restricted gift, such as artwork, that must be used for a certain
purpose and may not be sold.
 Another example might be a donor-restricted gift to be invested, with the principal

preserved and the income available for expenditure.
Assets may be temporarily restricted.
 An example may be a donor-restricted gift to be invested for a certain period during which
only the income may be expended. After a certain point in time, the principal may be
expended as well.
 Another example might be a donor-restricted gift to be expended for certain purposes only
such as a special program or project. The gift might be restricted to the building and
equipment fund.
Assets may be unrestricted. Examples include:
 Assets resulting from operations
 Unrestricted gifts of cash or other assets
 Temporarily restricted assets released due to satisfaction of the donor’s provisions
 Governing board-designated funds
Statement of Activities
The statement of activities is also presented for the entity as a whole. Its primary focus is to
provide relevant information about:
 The effects of transactions and other events and circumstances that change the amount and
nature of net assets
 The relationships of those transactions and other events and circumstances to each other
 How the organization’s resources are used in providing various programs or services
Statement of Cash Flows
A not-for-profit organization presents a statement of cash flows similar to that presented by a

business enterprise. They may use either the direct or indirect method of presenting cash flows
from operating activities. The primary purpose of the statement of cash flows is to provide
relevant information about the cash receipts and cash payments of an organization during the
period.
MULTIPLE CHOICE
QUESTIONS
General Concepts:
1. Unconditional promises to give are recognized as contribution revenue when:

a. The promise is received
b. The related receivable is collected
c. The time or purpose restriction is satisfied
d. The future event that binds the promisor occurs
2. Net assets that are restricted by the governing board of a nongovernment, not-for-profit
organization are reported as a part of:
a. Permanently restricted net assets
b. Temporarily restricted net assets
c. Unrestricted net assets
d. Either permanently restricted or temporarily restricted net assets, depending on
the term of the restriction
3. Which of the following is not a characteristic of a conditional promise to give:

a. Depend on the occurrence of a specified future and uncertain event to bind the
promisor
b. Gift may have to be returned to donor if condition is not met
c. Recognized as contribution revenue when the conditions are substantially met
d. Depends on demand by the promise for performance
4. Unconditional promises to give that are collectible within one year of the financial
statement date:
a. Should be reported at their gross amount
b. Should be reported at the gross amount less an allowance for uncollectible
accounts
c. Should be reported at the present value of the amounts expected to be
collected, using the donor’s incremental borrowing rate
d. Should not be reported until collected
5. When a temporary restriction on resources of a nongovernment, not-for-profit entity is met
by the incurrence of an expense for the restricted purpose:
a. The expense is reported in the statement of activity as an increase in
b. Amounts reported in the temporarily restricted net assets are reclassified as
c. The entry is a debit to expense and a credit to the program services
d. The expense is reported in restricted net assets
6. How will a nongovernment, not-for-profit entity record an agency transaction in which it

receives resources?
a. No entry is made in the accounts
b. Debit and asset account and credit contribution revenue
c. Debit and asset account and credit temporarily restricted net assets
d. Debit and asset account and credit a liability account
7. Financial statements of Not-for-Profit Organization, focuses on:
a. Basic information for the organization as a whole
b. Standardization of funds nomenclature
c. Inherent differences of not-for-profit organizations that impact reporting
presentations.
d. Distinction between current fund and noncurrent fund.
8. In preparing the statement of cash flows for a nongovernment, not-for-profit entity, cash
contributions that are restricted for long-term purposes are classified as:
a. Operating activities c. Financial activities
b. Investing activities d. Capital and related financing activities
9. Long-lived assets are purchased by a nongovernment, not-for-profit entity with cash that
was restricted for that purpose. The assets are reported in temporarily restricted net assets.
Depreciation expense is reported in unrestricted net assets.
a. The depreciation expense is incorrectly reported
b. An amount equal to the depreciation is reclassified from temporarily restricted
to unrestricted net assets
c. An amount equal to the depreciation is reclassified from unrestricted to
temporarily restricted net assets.
d. An amount equal to the depreciation is reported as revenues.
10. A nongovernment, not-for-profit entity gives donors a sweatshirt imprinted with its logo
when they pay P15 dues. The value of the sweatshirt is approximately P15. This
transaction is most likely reported as:
a. An exchange transaction c. A contribution
b. An agency transaction d. A gift in kind
11. A large not-for-profit organization’s statement of activities should report the net change for
net assets that are
Unrestricted Permanently restricted
a. Yes Yes
b. Yes No
c. No No
d. No Yes
12. A statement of financial position (balance sheet), which reports unrestricted temporarily
restricted, and permanently restricted net assets, is required for which one of the following
organizations?
I. A public university
II. A private, not-for-profit hospital
a. Both I and II c. Neither I nor II

b. I only d. II only
13. Which of the following classifications is required for reporting of expenses by all not-for-profit
organizations?
a. Natural classification in the statement of activities or notes to the financial statements.
b. Functional classification in the statement of activities or notes to the financial
statements.
c. Functional classification in the statement of activities and natural classification in a
matrix format in a separate statement.
d. Functional classification in the statement of activities and natural classification in the
notes to the financial statements.
14. Which prescribes the financial statements of not-for-profit organizations, reporting
reclassifications is caused by which of the following?
I. Expiration of donor-imposed conditions.
II. Expiration of donor-imposed restrictions.
a. I only c. II only
b. Both I and II d. neither I nor II
15. Which of the following transactions or events would cause increase in unrestricted net
asset for the year ended December 31, 2018?
I. A voluntary health and welfare organization spent a restricted donation which
was received in 2017. In accordance with the donor’s wishes, the donation was
spent on public health education during 2018.
II. During 2018, a private, not-for-profit college earned dividends and interest on
term endowments. Donor’s placed no restrictions on the earnings of term
endowments. The governing board of the college intends to use this investment
income to fund undergraduate scholarships for 2019.
a. II only c. Neither I nor II

b. I only d. both I and II
Accounting for Hospital/Health Care Providers:
16. Tina Hospital’s patient service revenues for services provided in 20x7, at established rates,
amounted to P8,000,000 on the accrual basis. For internal reporting, Tina uses the
discharge method. Under this method, patient service revenues are recognized only when
patients are discharged, with no recognition given to revenues accruing for services to
patients not yet discharged. Patient service revenues at established rates using the discharge
method amounted to P7,000,000 for 20x7. According to generally accepted accounting
principles, Tina should report patient service revenues for 20x7 of
a. Either P8,000,000 or P7,000,000, at the option of the hospital
b. P8,000,000
c. P7,500,000
d. P7,000,000
17. During 20x7, UST Hospital purchased medicines for hospital use totaling P800,000.
Included in this P800,000 was an invoice of P10,000 that was canceled in 2011 by the
vendor because the vendor wished to donate this medicine to UST. This donation of
medicine should be recorded as
a. A P10,000 reduction of medicine expense.
b. An increase in other operating revenue of P10,000.
c. A direct P10,000 credit to the general (unrestricted) funds balance.
d. A P10,000 credit to the restricted funds balance.
18. St. Luke’s Hospital received on unrestricted bequest of P100,000 in 2017. This bequest
should be recorded as
a. A memorandum entry only.
b. Other operating revenue of P100,000
c. Nonoperating revenue of P100,000
d. A direct credit of P100,000 to the fund balance.
19. On March 1, 201x7, Katkat Ong established a P100,000 endowment fund, the income from
which is to be paid to Cebu Hospital for general operating purposes. Cebu does not control
the fund’s principal. Katkat Ong appointed Philippine National Bank as trustees of this
fund. What journal entry is required by Cebu to record the establishment of the
endowment?
Debit Credit
a. Cash P100,000
…………………………………………....
Contribution Revenue – Permanent P100,000
……….
b. Cash 100,000
…………………………………………....
Contribution Revenue – Permanent 100,000
……….
c. Nonexpendable endowment fund …………….. 100,000
Contribution Revenue – Permanent 100,000
……….
d. Memorandum entry only
20. In 20x7, St. Paul Hospital received on unrestricted bequest of common stock with a fair
market value of P50,000 on the date of receipt of the stock. The testator had paid P20,000
for this stock in 20x7. St. Paul Hospital should record this bequest as
a. Non-operating revenue of P50,000.
b. Non-operating revenue of P30,000.
c. Non-operating revenue of P20,000.
21. Capital Hospital has a marketable equity securities portfolio that is appropriately included
in noncurrent assets in unrestricted funds. The portfolio has an aggregate cost of P300,000.
If had an aggregate fair market value of P250,000 at the end of 2018 and P290,000 at the
end of 20x7. If the portfolio was properly reported in the balance sheet at the end of 20x7,
the change in the valuation allowance at the end of 20x8 should be
a. P0. c. An increase of P40,000
b. A decrease of P40,000 d. An increase of P50,000
22. Philippine General Hospital’s accounting records disclosed the following information:
Net resources invested in plant assets ……………………………. P10,000,000
Board-designated funds ………………………………………….. 2,000,000
What amount should be included as part of unrestricted funds?

a. P12,000,000 c. P2,000,000
b. 10,000,000 d. 0
23. East Avenue Hospital fiscal year ends May 31, 20x7. In March 20x7, a P300,000
unrestricted bequest and a P500,000 pure endowment grant were received. In April 20x7, a
bank notified East Avenue that the bank received P10,000 to be held in permanent trust by
the bank. Eat Avenue is to receive the income from this donation. East Avenue should
record the P300,000 unrestricted bequest as
a. Non-operating revenue c. A direct credit to the fund balance
b. Other operating revenue d. A credit to operating expenses
24. Using the same information in the P500,000 pure endowment grant:
a. May be expended by the governing board only to the extent of the principal
since the income from this fund must be accumulated.
b. Should be reported as non-operating revenue when the full amount of principal
is expended.
c. Should be recorded as a memorandum entry only.
d. Should be accounted for as donor-restricted funds upon receipt.
25. Using the same information in the P10,000 donation being held by the bank is permanent
trust should be:
a. Recorded in East Avenue’s restricted revenue.
b. Recorded by East Avenue as non-operating revenue.
c. Recorded by East Avenue as other operating revenue.
d. Disclosed in notes to East Avenue’s financial statements.
26. UE Hospital, a voluntary institution, has a pure endowment fund, the income from which is
required to be used for library acquisitions. Philippine law and the donor are silent on the
accounting treatment for investment gains and losses. In 20x7, UE Hospital sold 1,000
shares of stock from the endowment fund’s investment portfolio. The carrying amount of
the securities was P50,000. Net proceeds from the sale amounted to P120,000. This
transaction should be recorded in the endowment funds as a debit to cash for P120,000 and
as credits to
a. Contribution Revenue – Permanent, P50,000 and Contribution Revenue –
Temporary, P70,000.
b. Contribution Revenue – Permanent, P50,000 and due to general fund, P70,000.
c. Investments, P50,000 and Contribution Revenue – Permanent, P70,000.
d. Investments, P50,000 and Contribution Revenue – Permanent, P70,000.
27. Land valued at P400,000 and subject to a P150,000 mortgage was donated to Makati
Medical Hospital without restriction as to use. Which of the following entries should
Makati Medical make to record this donation?
a. Land …………………………………………….. 400,000
Mortgage payable ………………................. 150,000
Contribution Revenue – Permanent ………… 250,000
b. Land ……………………………………………... 400,000
Debt fund balance …………………………. 150,000
Contributions revenue ………………………. 250,000
c. Land ……………………………………………... 400,000
Debt fund balance …………………………. 150,000
Contribution Revenue – Permanent ………… 250,000
d. Land …………………………………………….. 400,000
Mortgage payable ……………………….... 150,000
Contribution Revenue – Unrestricted ……….. 250,000
28. In June 20x7, San Antonio Hospital purchased medicines from Park Pharmaceutical Co. at
a cost of P1,000. However, Park notified San Antonio that the invoice was being canceled
and that the medicines were being donated to San Antonio. San Antonio should record this
donation of medicines as
a. Other operating revenue of P1,000.
b. A P1,000 credit to operating expenses.
c. A P1,000 credit to non-operating expenses.
29. Williams Hospital, a nonprofit hospital affiliated with a religious group, reported the
following information for the year ended December 31, 2017:
Gross patient service revenue at the hospital’s full
established rates …………………………………………. P980,000
Bad debts expenses ……………………………………………… 10,000
Contractual adjustments with third-party payors ………………… 100,000
Allowance for discounts to hospital employees …………………... 15,000
On the hospital’s statement of operations for the year ended December 31, 20x7, what
amount should be reported as net patient service revenue?
a. P865,000 c. P855,000
b. 880,000 d. 955,000
30. Princess Hospital, a nonprofit hospital affiliated with a private university, provided
P200,000of charity care for patients during the year ended December 31, 20x7. The
hospital should report the charity care:
a. As a net patient service revenue of P200,000 on the statement of operations.
b. As net patient service revenue of P200,000 and as operating expenses of
P200,000 on the statement of operation.
c. As accounts receivable of P200,000 on the balance sheet at December 31,
20x7.
d. Only in the notes to the financial statements
31. Leslie Hospital, a nonprofit hospital affiliated with a private university, reported the
following information for the year ended December 31, 20x7.
Cash contribution received from donors for capital

additions to be acquired in 20x8 ……………………… P150,000
Proceeds from sales at hospital gift shop and snack bar ………. 75,000
Dividend revenue not restricted by donors or by law ………….. 25,000
Using the information provided, what amount should be reported as “other revenue and
gains” on the hospital’s statement of operations for the year ended December 31, 20x7:
a. P25,000 c. P100,000
b. 75,000 d. 250,000
32. FEU Hospital a nonprofit hospital affiliated with FEU University, received the following
cash contributions from donor during the year ended December 31, 20x7.
Contributions restricted by donors for research ………………… P50,000
Contributions restricted by donors for capital
acquisitions ……………………………………………… 150,000
Neither of the contributions was spent during 20x7, however, during 20x8, the hospital
spent the entire P50,000 contribution on research and the entire P250,000 contribution on a
capital asset which was placed into service during the year. On the hospital’s statement of
operations for the year ended December 31, 20x8, what total amount should be reported for
“net assets released from restrictions.”
a. P 50,000 c. P250,000
b. 300,000 d. 0
33. St. Luke’s Hospital, a private not-for-profit hospital, had the following cash receipts for the
year ended December 31, 20x7:
Patient service revenue ………………………………………….. P300,000
Gift shop revenue ………………………………………………... 25,000
Interest revenue restricted by donor stipulation
for acquisition of equipment ……………………………... 50,000
As a result of these cash receipts, the hospital’s statement of cash flows for the year ended
December 31, 20x7, would report an increase in operating activities of
a. P325,000 c. P350,000
b. 375,000 d. 300,000
34. St. Paul’s Hospital, a nonprofit hospital affiliated with St. Paul College, had the following
cash receipts for the year ended December 31, 20x7:
Collections of health care receivables ……………………………. P750,000
Contribution from donor to establish a term endowment …………. 250,000
Tuition from nursing school …………………………………………
50,000
Dividends received from investments in permanent
endowment ……………………………………………….... 80,000
The dividends received are restricted by the donor for hospital building improvements. No
improvements were made during 20x7. On the hospital’s statement of cash flows for the
year ended December 31, 20x7, what amount of these cash receipts would be included in
the amount reported for the net cash provided (used) by operating activities?
a. P880,000 c. P1,050,000
b. 800,000 d. 750,000
35. Chinese General Hospital a nonprofit hospital affiliated with a religious group, received the
following cash contributions from donors during the year ended December 31, 20x7:
For capital acquisitions ……………………………………………. P400,000
For permanent endowments ………………………………………. 300,000
The cash received for capital acquisitions will be spent in 20x8, while the cash received for
the permanent endowment was used to acquire investments during 20x8. What effect did
these cash contributions have on the amounts reported for cash flows from investing
activities and cash flows from financing activities on the statement of cash flows for the
year ended December 31, 20x7:
Cash flows from Cash flows from
investing activities financing activities
a. Decrease P300,000 Increase P400,000
b. Decrease P700,000 Increase P700,000
c. Decrease P300,000 Increase P300,000
d. Decrease P300,000 Increase P400,000
36. Clara Hospital, a private not-for-profit hospital, earned P250,000 of gift shop revenues and
spent on research during the year ended December 31, 20x8. The P50,000 spent on
research was part of a P75,000 contribution received during December of 20x7 from a
donor who stipulated that the donation be used for medical research. Assume none of the
gift shop revenues were spent in 20x8. For the year ended December 31, 20x8, what was
the increase in unrestricted net assets from the events occurring during 20x8?
a. P300,000 c. P250,000
b. 200,000 d. 275,000
37. In hospital accounting, restricted funds are

a. Not available unless the Board of Directors remove the restrictions.
b. Restricted as to use only for board-designated purposes.
c. Not available for current operating use; however, the income generated by the
funds is available for current operating use.
d. Restricted as to use by the donor, grantor, or other source of the resources.
38. In addition to the statement of changes in changes in net assets, which of the following
financial statements should not-for-profit hospitals prepare?
a. Balance sheet and income statement.
b. Balance sheet, income statement, and statement of changes in financial
position.
c. Balance sheet, statement of operations, and statement of cash flows.
d. Statement of funds, statement of operations, and statement of cash flows.
39. In the balance sheet of a not-for-profit hospital, marketable equity securities should be
reported at
a. The lower of aggregate cost of market in separate portfolios for unrestricted
current, unrestricted noncurrent, restricted current, and restricted noncurrent
assets.
b. The lower of aggregate cost of market in separate portfolios for unrestricted
and restricted assets.
c. The lower of aggregate cost of market in separate portfolios for current and
noncurrent assets.
d. Cost, with no valuation for declines in market value, and in separate portfolios
for unrestricted and restricted assets.
40. The property, plant, and equipment of a not-for-profit hospital should be accounted for as
part of
a. Unrestricted funds.
b. Restricted funds.
c. Specific purpose funds.
d. Other non-operating funds.
41. Equipment donated for use in a hospital should be reported as

a. Other operating revenues.
b. Non-operating revenues.
c. Additions to the unrestricted funds balance.
d. Additions to the restricted funds balance.
42. Revenue from the parking lot operated by a hospital would normally be included in
a. Patient service revenue.
b. Ancillary service revenue.
c. Other operating revenue.
d. Other non-operating revenue.
43. Quezon City’s community hospital, which uses enterprises fund reporting, normally
includes proceeds from sale of cafeteria meals in
a. Patient service revenues.
b. Other operating operating revenues.
c. Ancillary services revenues.
d. Deductions from dietary service expenses.
44. Revenue of a hospital from grants specified by the donor for research would normally be
included in
a. Other non-operating revenue.
b. Other operating revenue.
c. Patient services revenue.
d. Ancillary service revenue.
45. A hospital should report earnings from endowment funds that are restricted to a specific
operating purpose as
a. Contribution Revenue – Unrestricted, when expended.
b. Contribution Revenue – Unrestricted revenues, when expended.
c. Contribution Revenue – Unrestricted, when received.
d. Contribution Revenue – Permanent revenues, when received.
Accounting for Colleges and Universities:
46. University of Santo Tomas unrestricted current funds comprised the following:
Assets ………………………………………………………… P5,000,000
Liabilities (including deferred revenues of P100,000) ………. 3,000,000
The fund balance of net assets of University of Santo Tomas unrestricted set assets was
a. P1,900,000 c. P2,100,000
b. 2,000,000 d. 5,000,000
47. For the 20x7 summer session, Far Eastern University assessed its students P300,000 for
tuition and fees. However, the net amount realized was only P290,000 because of the
following reductions:
Tuition remissions granted to faculty member’s families ………. P3,000
Class cancellation refunds …………………………………….. 7,000
How much unrestricted revenues from tuition and fees should Far Eastern University
report for the period?
a. P290,000 c. P297,000
b. 293,000 d. 300,000
48. For the summer session of 20x7, Silliman University assessed its students P1,700,000 (net
of refunds), covering tuition and fees for educational and general purposes. However, only
P1,500,000 was expected to be realized because scholarships totaling P150,000 were
granted to students, and tuition remissions of P50,000 were allowed to faculty members’
children attending Silliman. What amount should Silliman include in the unrestricted
revenues from student tuition and fees?
a. P1,500,000 c. P1,650,000
b. 1,550,000 d. 1,700,000
49. The following receipts were among those recorded by St. Louis College during 20x7:
Unrestricted gifts ……………………………………………… P500,000
Restricted current funds (expended for current
operating purposes) ………………………………….... 200,000
Restricted current funds (not yet expended) …………………… 100,000
The amount that should be included as:

Unrestricted / Unrestricted /
Current Fund Current Fund
Revenues Revenue Revenues Revenue
a. P800,000 P700,000 c. P600,000 P600,000
b. 700,000 800,000 d. 500,000 500,000
50. The following information was available from St. Louis University’s accounting records
for its current funds for the year ended March 31, 20x7:
Restricted gifts received
Expended ………………………………………………… P100,000
Not expended ……………………………………………. 300,000
Unrestricted gifts received
Expended …………………………………………………. 600,000
Not expended …………………………………………….. 75,000
What amount should be included in current funds revenues for the year ended March 31,
20x7?
a. P600,000 c. P 775,000
b. 700,000 d. 1,00,000
51. The following funds were among those held by Centro Escolar University at December 31,
20x7?
Principal specified by the donor as non-expendable …………… P500,000
Principal expendable after the year 20x8 ……………………… 300,000
Principal designated from the current funds ……………………… 100,000
What amount should Centro Escolar University classify as regular endowment funds (or
Permanently Restricted Endowments)?
a. P100,000 c. P500,000
b. 300,000 d. 900,000
52. On January 2, 20x7, a graduate of Ateneo established a permanent trust fund and appointed
Security Bank as the trustee. The income from the trust fund is to paid to Ateneo and used
only by the school of education to support student scholarships. What entry is required on
Ateneo’s books to record the receipt of cash from the interest on the trust fund?
a. Debit cash and credit deferred revenue.
b. Debit cash and credit contribution revenue – temporary.
c. Debit cash and credit endowment fund balance.
d. Debit cash and credit unrestricted endowment revenue.
53. In 20x7, University of San Agustin board of trustees established a P100,000 fund to be
retained and invested for scholarship grants. In 20x7, the fund earned P6,000 which had
not been disbursed at December 31, 20x7. What amount should University of San Agustin
report in a quasi-endowment fund balance at December 31, 20x7?
a. P 0 c. P100,000
b. 6,000 d. 106,000
54. Sienna College, a private not-for-profit college, received the following contributions
during 20x7:
I. P5,000,000 from alumni for construction of a new wing on the science building
to be constructed in 20x8.
II. P1,000,000 from a donor who stipulated that the contribution be invested
indefinitely and that the earnings be used for scholarships. As of December 31,
20x7, earnings from investments amounted to P50,000.
For the year ended December 31, 20x7, what amount of these contributions should be
reported as temporarily restricted revenues on the statement of activities?
a. P 50,000 c. P5,000,000
b. 5,050,000 d. 6,050,000
55. On November 30, 20x7, Malou Basil, an alumnus of Santo School, a private, not-for-profit
high school, contributed P15,000, with the stipulation that the donation be used for faculty
travel expenses during 20x8. During 20x8 Santo spent all of the donation in accordance
with Malou’s wishes. For the year ended December 31, 20x8, what was the effect of the
donation on unrestricted and temporarily restricted net assets?
a. Increase Decrease
b. No effect Decrease
c. Increase No effect
56. Liway College, a private not-for-profit college, received P25,000 from Ms. Mary Basilio
on April 30, 20x7. Ms. Basilio stipulated that her contribution be used to support faculty
research during the fiscal year beginning on July 1, 20x7. On July 17, 20x7, administrators
of Liway awarded research grants totaling P25,000 to several faculty in accordance with
the wishes of Ms. Basilio. For the year ended June 30, 20x7, Liway College should report
the P25,000 contribution as
a. Temporarily restricted revenues on the statement of activities.
b. Unrestricted revenue on the statement of activities.
c. Temporarily restricted deferred revenue on the statement of activities.
d. An increase in fund balance on the statement of financial position.
57. On July 31, 20x7, St. Vincent’s College showed the following amounts to be used for
Renewal and replacement of college properties ………………… P200,000
Retirement of indebtedness on college properties ……………….. 300,000
Purchase of physical properties for college purposes
but unexpended at 7/31/20x7 ………………………….. 400,000
What total amount should be included in St. Vincent’s plant funds at July 31, 20x7?
a. P900,000 c. P400,000
b. 600,000 d. 200,000
58. Albert University, a private not-for-profit university, had the following cash inflows during
the year ended June 30, 20x7:
(1.) P500,000 from students for tuition.
(2.) P300,000 from a donor who stipulated that the money be invested indefinitely.
(3.) P100,000 from a donor who stipulated that the money spent in accordance with
the wishes of Albert’s governing board.
On Albert University’s statement of cash flows for the year ended June 30, 20x7, what
amount of these cash flows should be reported as operating activities?
a. P900,000 c. P800,000
b. 400,000 d. 600,000
59. The current funds group of a not-for-profit private university includes which of the
following?
Annuity funds Loan funds
a. Yes Yes
b. Yes No
c. No No
d. No Yes
60. The plant funds group of a not-for-profit private university includes which of the following
subgroups?
Investment in Loan funds
plant funds
a. No Yes
b. No No
c. Yes No
d. Yes Yes
61. Which of the following funds are usually encountered in a not-for-profit private university?
Current funds Plant funds
a. No Yes
b. No No
c. Yes No
d. Yes Yes
62. Which of the following funds are usually encountered in a not-for-profit private university?
Loan funds Life income funds
a. No Yes
b. No No
c. Yes No
d. Yes Yes
63. An alumnus donates securities to San Sebastian College and stipulates that the principal be
held in perpetuity and revenues be used for faculty travel. Dividends received from the
securities should be recognized as revenues in
a. Endowment funds. c. Restricted current funds.
b. Quasi-endowment funds. d. Unrestricted current funds.
64. A college’s plant funds group includes which of the following subgroups?
I. Renewals and replacement funds.
II. Retirement of indebtedness funds.
III. Restricted current funds.
a. I and II. c. II and III.
b. I and III. d. I only.
65. Funds received by the college from donors who have stipulated that the principal is
nonexpendable but the income generated may be expended by current operating funds
a. Endowment fund. c. Agency fund.
b. Term endowment fund. d. Quasi-endowment fund.
66. In the loan fund of a college, each of the following types of loans would be found except
a. Faculty c. Staff
b. Computer d. Student
Accounting for Voluntary Health and Welfare Organization
67. Charity Fund is a voluntary welfare organization funded by contributions from the general
public. During 20x7, unrestricted pledges of P100,000 were received, half of which were
payable in 20x7, with the other half payable in 20x8 for use in 20x8. It was estimated that
20% of these pledges would be uncollectible. With respect to the pledges, the amount that
should be reported for 20x7 as net contributions, under public support, is
a. P100,000 c. P50,000
b. 80,000 d. 40,000
68. In 20x7, Manila Health, a voluntary health and welfare organization, received a bequest of
a P200,000 certificate of deposit maturing in 20x8. The testator’s only stipulations were
that this certificate be held until maturity and that the interest revenue be used to finance
salaries for a pre-school program. Interest revenue for 20x8 was P16,000. When the
certificate matured and was redeemed, the board of trustees adopted a formal resolution
designating P40,000 of the proceeds for the future purchase of equipment for the pre-
school program. What amount should Manila report in its 20x8 year-end balance sheet as
net assets designated for the pre-school program?
a. P -0- c. P40,000
b. 16,000 d. 56,000
69. Light Hope, a voluntary health and welfare organization, received a cash donation of
P500,000 from Mr. Charles on November 15, 20x7. Mr. Charles requested that his
donation be used to acquire equipment for the organization. Light Hope used the donation
to acquire equipment costing P500,000 in January of 20x8. For the year ended December
31, 20x7, Light Hope should report the P500,000 contribution on its
b. Statement of financial position as temporarily restricted deferred revenue.
c. Statement of financial position as unrestricted deferred revenue.
70. No Ways, a voluntary health and welfare organization, received a contribution of P10,000
from a donor in 20x7. The donor did not specify any use restriction on the contribution;
however, the donor specified that the donation should not be used until 20x8. The
governing board of No Ways spent the contribution in 20x8 for fund-raising expenses. For
the year ended December 31, 20x7, No Ways should report the contribution on its
a. Statement of financial position as deferred revenue.
b. Statement of activities as unrestricted revenue.
c. Statement of financial position as an increase in net assets.
71. On December 20, 20x7, United, a voluntary health and welfare organization, received a
donation of computer equipment valued at P25,000 from a local computer retailer. The
equipment is expected to have a useful life of 3 years. The donor placed no restrictions on
how long the computer equipment was to be used and United has an accounting policy
which does not imply a time restriction on gifts of long-lived assets. On United’s statement
of activities prepared for the year ended December 31, 20x7, the donation of computer
equipment should be reported
a. As an increase in temporarily restricted net assets.
b. Only in the notes to the financial statements.
d. As either an increase in temporarily restricted net assets or as an increase in
contributions in 20x7:
I. P500 from donors who stipulated that the money not be spent until 2018.
II. P1,000 from donors who stipulated that the contributions be used for the
acquisition of equipment, none of which was acquired in 2018.
Which of the above events increased temporarily restricted net assets for the year ending
December 31, 20x7?
a. I only c. II only
b. Both I and II d. Neither I nor II
73. Which of the following transactions of a voluntary health and welfare organization would
increase temporarily restricted net assets on the statement of activities for the year ended
June 30, 20x7.
I. Received a contribution of P10,000 from a donor on May 15, 20x7, who
stipulated that the donation not be spent until August of 20x7.
II. Spent P25,000 for fund-raising on June 20, 20x7. The amount expended came
from a P25,000 contribution on March 12, 20x7. The donor stipulated that the
contribution be used for fund-raising activities.
a. Both I and II c. I only

b. Neither I nor II d. II only
74. On December 31, 20x7, Faith Haven, a voluntary health and welfare organization, received
a pledge from a donor who stipulated that P1,000 would be given to the organization each
year for the next 5 years, starting on December 31, 20x8. Present value factors at 6% for 5
periods are presented below.
Present value of an ordinary annuity for 5 periods at 6% ………………… 4.21236
Present value of an annuity due for 5 periods at 6% ………………… 4.46511
For the year ended December 31, 2017, Faith Haven should report, on its statement of
activities.
a. Unrestricted revenues of P5,000.
b. Temporarily restricted revenues of P4,465.
c. Unrestricted revenues of P1,465.
d. Temporarily restricted revenues of P4,212.
75. A statement of functional expenses is required for which one of the following private
nonprofit organizations?
a. Colleges
b. Hospital
c. Voluntary health and welfare organizations
d. Performing arts organizations
Other Not-For-Profit Organization:

76. In 20x7, the Board of Trustees of Ayala Foundation designated P100,000 from its current
funds for college scholarships. Also in 20x7, the foundation received a bequest of
P200,000 from an estate of a benefactor who specified that the bequest was to be used for
hiring teachers to tutor handicapped students. What amount should be accounted for as
current restricted funds?
a. P 0 c. P200,000
b. 100,000 d. 300,000
77. On January 2, 20x7, a nonprofit botanical society received a gift of an exhaustible fixed
asset with an estimated useful life of 10 years and no salvage value. The donor’s cost of
this asset was P20,000, and its fair market value at the date of the gift was P30,000. What
amount of depreciation of this asset should the society recognize in its 20x7 financial
statements?
a. P3,000 c. P2,000
b. 2,500 d. 0
78. Royal Anchor, a community foundation, incurred P5,000 in management and general
expenses during 20x7. In Royal Anchor statement of operation and changes in net assets
for the year ended December 31, 20x7, the P5,000 should be reported as
a. A contra account offsetting revenue and support.
b. Part of program services.
c. Part of supporting services.
d. A direct reduction of fund balance.
79. The following expenditures were made by Green Community, a society for the protection
of the environment
Printing of the annual report ……………………………………… P12,000
Unsolicited merchandise sent to encourage contributions ………….
25,000
Cost of an audit performed by a CPA firm ……………………….. 3,000
What amount should be classified as fund-raising costs in the society’s activity statement?
a. P37,000 c. P25,000
b. 28,000 d. 0
80. In April 20x7, Mal Lush donated P100,000 cash for her church, with the stipulation that
the income generated from this gift is to be paid to Mal Lush during her lifetime. The
conditions of this donation are that, after Mal Lush dies, the principal can be used by the
church for any purpose voted on by the church elders. The church received interest of
P8,000 on the P100,000 for the year ended March 31, 20x8, and the interest was remitted
to Mal Lush. In the church’s March 31, 20x8 financial statements
a. P8,000 should be reported under support and revenue in the activity statement.
b. P9,200 should be reported under support and revenue in the activity statement.
c. P100,000 should be reported as deferred support in the balance sheet.
d. The gifts and its terms should be disclosed only in notes to the financial
statements.
81. Seniors Association is a not-for-profit organization that provides services to senior citizens.
Senior employs a full-time staff of 10 people at an annual cost of P150,000. In addition,
two volunteers work as part-time secretaries replacing last years’ full-time secretary who
earned P10,000. Services performed by other volunteers for special events had an
estimated value of P15,000. These volunteers were employees of local business and they
received small-value items for their participation. What amount should Seniors report for
salary and wage expenses related to the above items?
a. P150,000 c. P165,000
b. 160,000 d. 175,000
82. The League, a not-for-profit organization, received the following pledges:

Unrestricted ………………………………………………. P200,000
Restricted for capital additions …………………………... 150,000
All pledges are legally enforceable; however, the League’s experience indicates that 10%
of all pledges prove to be uncollectible. What amount should the League report as pledges
receivable, net of any required allowance account?
a. P135,000 c. P315,000
b. 180,000 d. 350,000
83. Tarsier Park, a zoological society, received contributions restricted for research totaling
P50,000 in 20x7. Assume the P50,000 was not expensed in 20x7. These contributions were
used to purchase P35,000 of research equipment in 20x7. As a result of these transactions,
for the year ended December 31, 20x7, Tarsier Park will report, on its statement of
activities, a
a. P15,000 increase in temporarily restricted net assets.
b. P50,000 increase in temporarily restricted net assets.
c. P35,000 increase in unrestricted net assets.
d. P15,000 increase in unrestricted net assets.
84. On December 30, 20x7, the Board of Trustees of Eddie Museum designated P4,000,000 of
unrestricted net assets for the construction of an addition to its building. What effect does
this designation have on the museum’s unrestricted and temporarily restricted net assets
which are reported in the statement of financial position (balance sheet at December 31,
20x7)
a. No effect Increase
b. Decrease Increase
c. Decrease No effect
85. Which of the following transactions would result in an increase in unrestricted net assets
for the year ended December 31, 20x7?
I. A private not-for-profit hospital earned interest an investments which were
board-designated.
II. A voluntary health and welfare organization received unconditional promises
to give (pledges) which will not be received until the beginning of 20x8. The
donors placed no restrictions on their donation.
a. Both I and II c. II only
b. I only d. Neither I nor II
86. During 20x7, Ms. Florendo, a prominent art collector, donated several items in her
collection to the Davao Museum, a private, not-for-profit organization. Ms. Florendo
stipulated that her contribution be shown to the public, that it should be preserved, and not
to be sold. Davao’s accounting policy is to capitalize all donations of art, historical
treasures, and similar items. On the date of donation, what was the effect of Ms. Florendo’s
donation on Davao’s financial statements?
a. Temporarily restricted net assets increased.
b. Reclassifications caused a simultaneous increase in permanently restricted net
assets and a decrease in temporarily restricted net assets.
c. There was no effect on any class of Davao’s net assets.
d. Permanently restricted net assets increased.
87. Hazel Botanical Gardens established a P500,000 quasi endowment on September 1, 20x7.
On the garden’s statement of financial position at December 31, 20x7, the assets in this
quasi endowment should be included in which of the following classifications?
a. Temporarily restricted net assets.
b. Unrestricted net assets.
c. Permanently restricted net assets.
d. Either temporarily or permanently restricted net assets, depending on the
expected term of the quasi endowment.
88. On December 30, 20x7 Portal Museum, a not-for-profit organization, received a

P7,000,000 donation of Night Co., shares with donor-stipulated requirements as follows:
 Shares valued at P5,000,000 are to be sold, with the proceeds used to erect a
public viewing building.
 Shares valued at P2,000,000 are to be retained with the dividends used to
support current operations.
As a consequence of the receipt of the Night shares, how much should Portal report as
temporarily restricted net assets in the statement of financial position (balance sheet)?
a. P 0` c. P5,000,000
b. 2,000,000 d. 7,000,000
89. On the statement of activities for a not-for-profit performing arts center, expenses should
be deducted from
I. Unrestricted revenues.
II. Temporarily restricted revenues.
III. Permanently restricted revenues.
a. I, II and III c. I only
b. Both I and II d. II only
90. Save the Earth, a research organization, received a P500,000 contribution from Ms.
Basilio. Ms. Basilio stipulated that her donation be used to purchase a new computer
equipment for Save the Earth research staff. The contribution was received in August of
20x7, and the computers were acquired in January of 20x8. For the year ended December
31, 20x7, the P500,000 contribution should be reported by Save the Earth on its
b. Statement of activities as deferred revenue.
c. Statement of activities as temporarily restricted revenue.
d. Statement of activities position as deferred revenue.
91. The statement of financial position (balance sheet) for Lovers Library should report
separate peso amounts for the library’s net assets according to which of the following
classifications?
a. Unrestricted and permanently restricted.
b. Temporarily restricted and permanently restricted.
c. Unrestricted and temporarily restricted.
d. Unrestricted, temporarily restricted, and permanently restricted.
92. Manila Museum has both regular and term endowments. On the museum’s statement of
financial position (balance sheet), how should the net assets of each type of endowment be
reported?
Term endowments Regular endowments
a. Temporarily restricted Permanently restricted
b. Permanently restricted Permanently restricted
c. Unrestricted Temporarily restricted
d. Temporarily restricted Temporarily restricted
93. For Ever Light, a religious organization, net assets which can be expended in accordance
with the wishes of the governing board of the organization should be reported as
I. Unrestricted
II. Temporarily restricted
III. Permanently restricted
a. I only c. I, II and III
b. Both I and II d. I or II
94. Tau Gamma, a fraternal organization, should prepare a statement of financial position and
which of the following financial statements?
I. Statement of activities
II. Statement of changes in fund balances
III. Statement of each flows
a. I, II and III c. II and III
b. III only d. Both I and III
95. Aparri Broadcasting Station should recognize contributed services on its statement of
activities if which of the following conditions is (are) met?
I. The contributed services create or enhance nonfinancial assets.
II. The contributed services require specialized skills, are provided by individuals
possessing those skills, and would typically need to be purchased if not
provided by donation.
a. Both I and II c. I only
b. Neither I nor II d. Either I or II
96. The Requed family lost its home in a fire. On December 25, 20x7, a philanthropist sent
money to the Mic Society, a not-for-profit organization, to purchase furniture for the
Requed family. During January 20x8, Mic Society purchase this furniture for the Requed
family. How should Mic report the receipt of the money in its 20x7 financial statements?
a. As an unrestricted contribution
b. As a temporarily restricted contribution
c. As a permanently restricted contribution
d. As a liability
97. If the Quezon Museum, a not-for-profit organization, received a contribution of historical

artifacts, it need to be recognized the contribution if the artifacts are to be sold and the
proceeds used to
a. Support general museum activities.
b. Acquire other items for collections.
c. Repair existing collections.
d. Purchase buildings to house collections.
98. A storm broke glass windows in the building of Geod Meditators, a not-for-profit religious
organization. A member of Geod congregation, a professional glazier, replaced the
windows at no charge. In Geod’s statement of activities, the breakage and replacement of
the windows should
a. Not be reported.
b. Be reported by note disclosure only.
c. Be reported as an increase in both expenses and contributions.
d. Be reported as an increase in both net assets and contributions.
99. During the year ended December 31, 20x7, the Mars Foundation received the following
contributed services:
I. Tamayo and Bonafe, attorneys-at-low, contributed their services which
involved advice related to the foundation’s regular endowments.
II. Senior citizens participated in a telethon to raise money for a new music
building.
Which of these contributed services should be included in unrestricted revenues, gains, and
other support on Mars Foundation’s statement of activities for the year ended December
31, 20x7?
a. Both I and II c. II only
b. Neither I nor II d. I only
100. On December 5, 20x7, Bar Heating and Air Conditioning Service repaired the heating
system in the building occupied by Pahiyas, a voluntary health and welfare organization.
An invoice for P1,500 was received by Pahiyas for the repairs on December 15, 20x7. On
December 30, 20x7, Bar notified Pahiyas that the invoice was canceled and that the repairs
were being donated without charge. For the year ended December 31, 20x7 how should
Pahiyas report these contributed services?
a. Only in the notes of the financial statements.
b. No disclosure is required either in the financial statements or in the notes.
c. As an increase in unrestricted revenues and as an increase in expenses on the
statements of activities.
d. As an increase in temporarily restricted net assets on the statement of activities.
101. During the year ended December 31, 20x7 a not-for-profit performing arts entity received
the following donor-restricted contribution and investment income:
I. Cash contribution on P100,000 to be permanently invested.
II. Cash dividends and interest of P6,000 to be used for the acquisition of theater
equipment.
As a result of these cash receipts, the statement of cash flows for the year ended December
31, 20x7, would report an increase of
a. P106,000 from operating activities.
b. P106,000 from financing activities.
c. P6,000 from operating activities and an increase of P100,000 from financing
activities.
d. P100,000 from operating activities and an increase of P6,000 from financing
activities.
102. The Mahal Foundation, a not-for-profit organization, has the following cash contributions
and expenditures in 20x7.
 Unrestricted cash contributions of P500,000.
 Cash contributions of P200,000 restricted by the donor to the acquisition of
property.
 Cash expenditures of P200,000 to acquire property with the donation in the
above item.
Mahal statement of cash flows should include which of the following amounts?
Operating Investing Financing
Activities activities activities
a. P700,000 P(200,000) P 0
b. 500,000 0 0
c. 500,000 (200,000) 200,000
d. 0 500,000 200,000
103. Mild Care Center, Inc., a not-for-profit organization, receives revenue from various sources
during the year to support its day care center. The following cash amounts were received
during 20x7:
 P2,000 restricted by the donor to be used for meals for the children.
 P1,500 received for subscriptions to a monthly child care magazine with a fair
market value to subscribes of P1,000.
 P10,000 to be used only upon completion of a new playroom that was 75%
complete at December 31, 20x7.
What amount should Mild Care Centers record as contribution revenue in its 20x7
Statement of Activities?
a. P2,000 c. P10,000
b. 2,500 d. 11,000
104. The St. Louis Museum of Science, a private museum, reports the following expenses:
Educational programs; using restricted cash contributions …………
P15,000,000
Costs of capital campaign brochures and events …………………. 3,000,000
Administrative office salaries, paid in cash ………………………...
4,000,000
Utilities and salaries to maintain museum exhibits,
using unrestricted cash contributions ………………………..
32,000,000
On its statement of activities, the museum reports program expenses of:

a. P15,000,000 c. P47,000,000
b. P19,000,000 d. P51,000,000
105. A private not-for-profit organization records contribution as follows:
Services of CPAs and lawyers, reported as administrative expenses P1,000,000
Services of architects and contractors to build a new facility ………
6,000,000
On the statement of cash flows reconciliation of change in net assets to change in cash
from operating activities, how will these contributions be reported?
a. Add P7,000,000 to change in net assets.
b. Add P6,000,000 to change in net assets.
c. Add P1,000,000 to change in net assets.
d. Neither contribution affects the reconciliation.
106. During 20x3, the ReSA Review School receives P5,000 in cash contributions that are
donor-designated for the Marawi CPA Reviewees. The ResSA Review School distributes
P4,000 of these contributions to the Marawi CPA Reviews by 20x3 year-end. This
information is reported on the ReSA Review School’s 20x3 financial statements as:
a. Unrestricted contributions of P5,000
b. Liability to the Marawi CPA Reviewees, P1,000
c. Receivable from the Marawi CPA Reviewees, P1,000
d. Temporarily restricted contributions of P5,000
107. A not-for-profit organization receives cash contributions of P1,000,000 that are donor-
restricted for building a new office. As of year-end, P400,000 of this contribution has been
used for building construction. This information is reported as:
a. P1,000,000 in contribution revenue-permanently restricted on the statement of
activities
b. P1,000,000 balance in a long-term asset on the statement of financial position
c. P 600,000 balance in current assets on the statement of financial position
d. P 400,000 in contribution revenue-unrestricted on the statement of activities
108. ReSA Review School contributed P100,000 in cash to the Sampaloc Children in 20x3. The
donor specified that the contribution be held as a permanent endowment, and income from
related investments be used to help victims of tsunamis. The Sampaloc Children invested
the P100,000 in securities in 20x3. During 20x4, dividend income of P10,000 was earned.
How did the Sampaloc Children report this on its 20x4 statement of activities?
a. P10,000 increase in temporarily restricted in net assets
b. P10,000 increase in temporarily restricted net assets; P10,000 decrease in
temporarily restricted net assets and P10,000 increase in unrestricted net assets
for net assets released from use restrictions
c. P10,000 increase in permanently restricted net assets
d. P10,000 increase in unrestricted net assets, P100,000 decrease in permanently
restricted net assets
109. At the beginning of 20x4, a private not-for-profit organization receives a cash endowment
of P5,000,000. The donor states that the organization must retain the endowment, and cash
income on its investment must be used for specific program activities. The endowment is
invested in securities. During 20x4, investment income is P100,000. The securities have a
fair value of P5,500,000 at year-end. The organization has not spent any of the P100,000
by year-end. How is this information reported in the organization’s statement of activities
for 20x4?
Increase in Increase in Increase in
Permanently Temporarily Unrestricted
restricted net assets Restricted net assets net assets
a. P5,000,000 P100,000 P500,000
b. 5,500,000 0 100,000
c. 5,000,000 0 600,000
d. 5,000,000 100,000 0
110. At the beginning of 20x4, a private not-for-profit organization receives securities with a
fair value of P5,000,000. The donor states that the organization must retain the securities,
and cash income on its investment must be used for specific program activities. During
20x4, investment income is P100,000. The securities have a fair value of P5,500,000 at
year-end. The organization has not spent any of the P100,000 by year-end. How is this
information reported in the organization’s statement of activities for 20x4?
Permanently Temporarily Unrestricted
restricted net assets Restricted net assets net assets
a. P5,000,000 P100,000 P500,000
b. 5,500,000 0 100,000
c. 5,000,000 0 600,000
d. 5,000,000 100,000 0
111. In 20x2, a donor contributed common stock worth P500,000 to Habitat for Humanity, with
the stipulation that the shares be retained intact, and any dividend income be used to
support building projects in inner city neighborhoods in Sampaloc, Manila. The shares
decline in value by P20,000 during 20x3. How is this reported on Habitat for Humanity’s
20x3 statement of activities?
a. Decrease in permanently restricted net assets, P20,000
b. Decrease in temporary restricted net assets, P20,000
c. Decrease in unrestricted net assets, P20,000
d. Not reported
112. Which statement belong is required in the audited financial statement of a not-for-profit
organization?
a. Statement of changes in working capital
b. Income statement
c. Statement of changes in fund balances
d. Statement of cash flows
113. What is the “bottom line” for a not-for-profit organization?

a. Net income c. Change in net assets
b. Comprehensive income d. Operating profit
114. The operating statement of a not-for-profit organization reports:

a. Revenues, expenditures, and changes in fund balances
b. Changes in unrestricted, temporarily restricted, and permanently restricted net
assets
c. Revenues, expenses, and net income
d. Operating income and operating expenses
115. The statement of financial position of a not-for-profit organization has the following major
classifications:
a. Assets, liabilities, and net assets
b. Current funds, restricted funds, liabilities and unrestricted funds
c. Current assets, noncurrent assets, and net assets
d. Unrestricted assets, restricted assets, liabilities and equity
116. A cash contribution that is in the form of a permanent endowment is categorized in a not-
for-profit’s statement of cash flows as:
a. Cash from operating activities
b. Cash from financing activities
c. Cash from investing activities
d. Supplementary investing and financing activities
117. Expenses of a not-for-profit organization are reported:

a. As reductions in unrestricted net assets
b. As reductions in unrestricted or temporarily restricted net assets
c. As reductions of temporarily restricted net assets
d. As reduction in permanently restricted net assets
118. Resources set aside during the year by the board of directors for the replacement of plant
assets are reported in the statement of activities as:
a. A reduction in unrestricted net assets
b. An increase in permanently restricted net assets
c. An increase in temporarily restricted net assets
d. Not reported in the statement of activities
119. In the statement of cash flows of a not-for-profit organization, reconciliation must be

shown. What is the nature of this reconciliation?
a. Change in net assets to cash from operating activities
b. Net income to cash from operating activities
c. Change in net assets to cash from investing activities
d. Net income to cash from investing activities
120. Not-for-Profit Organizations present their expenses in what categories?

a. Programs, administrative, and fund-raising
b. Operating and non-operating
c. Unrestricted, temporarily restricted, and permanently restricted
d. Salaries, utilities, and programs
121. You are a CPA and you donate your services to prepare the financial statements for your
favorite charity. How does the charity report your donation?
a. Not reported
b. Expense, such as reduction in temporarily restricted assets
c. Contribution, as an increase in unrestricted net assets
d. Contribution, as an increase in permanently unrestricted net assets
122. Students and faculty advisors donate their time to the activities of Beta Alpha Psi. How
does Beta Alpha Psi report this contribution?
a. Not reported
b. Expense, such as reduction in temporarily restricted assets
d. Contribution, as an increase in permanently unrestricted net assets
123. A licensed contractor donates services to build an addition to Make-A-Wish Foundation’s

facilities. How is this reported in the Foundation’s financial statements?
a. Not reported
b. Increase in contributions – unrestricted, and expense, as a reduction in
unrestricted net assets on the statement of activities
c. Increase in assets on the balance sheet and increase in contributions –
unrestricted on the statement of activities
d. Net assets released, as a decrease in temporarily restricted net assets and
increase in unrestricted net assets, and expense, as a reduction in unrestricted
net assets.
124. Make-A-Wish Foundation reports contributions receivable on its balance sheet, related to
promises to be received over several years. How is this receivable measured?
a. Present value of future contributions
b. Gross contributions
c. Gross contributions, adjusted for expected uncollectibles
d. Present value of future contributions, adjusted for expected uncollectibles
125. The Red Cross receives donations for Leyte disaster relief in fiscal 20x3. The Red Cross
then pays money out for disaster relief efforts in Leyte during fiscal 20x2. What is the net
effect of these transactions on each of Red Cross’ categories of net assets in fiscal 20x2?
a. Reduction in temporarily restricted net assets; no net effect on unrestricted or
permanently restricted net assets
b. Reduction in permanently restricted net assets and increase in temporarily
restricted net assets; no net effect on unrestricted net assets
c. Increase in temporarily restricted net assets and decrease in unrestricted net
assets; no net effect on permanently restricted net assets
d. Reduction in unrestricted net assets; no net effect on temporarily or
126. Beta Alpha Psi receives donations as part of a capital campaign to raise money to build
new facilities. They need to raise P10 million in order to start construction, and they
haven’t reached that goal yet. The donations received are reported as increases in:
a. Temporarily restricted net assets c. Permanently restricted net assets
b. Liabilities d. Unrestricted net assets
127. In 20x4, a donor agrees, in writing, to donate P20,000 per year to a not-for-profit
organization over the next five years. Nothing is received in 20x4. How is this donation
reported on the 20x4 financial statements of the organizations?
a. Increases in unrestricted net assets on the statement of activities
b. Increase in temporarily restricted net assets on the statement of activities
c. Liability on the balance sheet
d. Not reported
128. The United Way collects contributions donor-restricted for the local YMCA, and then
distributes the contributions to the YMCA. How does United Way report this in its
a. Not reported
b. Revenue increases unrestricted net assets, expense decreases unrestricted net
assets
c. Revenues increases temporarily restricted net assets, net assets released
decreases temporarily restricted net assets and increases unrestricted net assets
d. Revenue increases temporarily restricted net assets, net assets released
decreases temporarily restricted net assets.
129. A donor makes a documented promise to contribute to Habitat for Humanity. Increases in
the present value of this promise
a. are not reported.
b. increase unrestricted net assets.
c. increase permanently restricted net assets.
d. increase temporarily restricted net assets.
130. The 20x8 balance sheet of Beta Alpha Psi has a balance of about P160,000 in temporarily
restricted net assets. In the footnotes, about P15,000 of this amount is labeled “diversity
awards”. This balance is:
a. Amounts spent to date for diversity awards
b. Money contributed for diversity awards that has not yet been spent
c. The amount of total donations to date for diversity awards
d. Money set aside by the Board of Beta Alpha Psi for diversity awards
131. How are investments reported by a not-for-profit organization?

a. Shown at cost; gains and losses appear on the statement of activities when the
investment is sold
b. Shown at market; unrealized gains and losses are reported on the balance sheet
and reclassified to the statement of activities when the investment is sold
c. Shown at market; unrealized gains and losses are reported on the statement of
activities as market value changes
d. Shown at cost; gains and losses are reported on the balance sheet as direct
adjustments of permanently restricted net assets
132. Increases in the value of investments mode using permanently restricted endowment
resources are typically shown in the external financial statements of a not-for-profit
organization as :
a. An increase in permanently restricted net assets
b. An increase in temporarily restricted net assets
c. An increase in unrestricted net assets
d. An increase in unrestricted net assets, unless such value changes are donor-
restricted
TEST BANK
CHAPTER 13
Private Not-For-Profit Organizations
MULTIPLE CHOICE
1. Topic: Statement of activities, expenses

LO 1
The St. Louis Museum of Science, a private museum, reports the following expenses:
Educational programs, using restricted cash contributions......... $15,000,000
Costs of capital campaign brochures and events..…...………… 3,000,000
Administrative office salaries, paid in cash…………………… 4,000,000
Utilities and salaries to maintain museum exhibits,
using unrestricted cash contributions………………….. 32,000,000
On its statement of activities, the museum reports program expenses of:
a. $15,000,000
b. $19,000,000
c. $47,000,000
d. $51,000,000
ANS: c
$15,000,000 + $32,000,000 = $47,000,000
2. Topic: Statement of cash flows, contributions of services

LO 1
A private NFP organization records contributions as follows:
Services of CPAs and lawyers, reported as administrative expense………. $1,000,000
Services of architects and contractors to build a new facility……………... 6,000,000
On the statement of cash flows reconciliation of change in net assets to change in cash
from operating activities, how will these contributions be reported?
a. Add $7,000,000 to change in net assets.

b. Add $6,000,000 to change in net assets.
c. Add $1,000,000 to change in net assets.
d. Neither contribution affects the reconciliation.
ANS: b
Only the contribution of services that create a nonfinancial asset affects the
reconciliation, because it increases net assets but not cash from operating activities.
Contributions classified as administrative expense do not change net assets, since there is
an offsetting increase in contributions revenue.
© Cambridge Business Publishers, 2013

Test Bank, Chapter 13 13-1
3. Topic: Contributions on behalf of others
LO 2
During 2013, the United Way receives $5,000 in cash contributions that are donor-
designated for the Salvation Army. The United Way distributes $4,000 of these
contributions to the Salvation Army by 2013 year-end. This information is reported on
the United Way’s 2013 financial statements as:
a. Unrestricted contributions of $5,000

b. Liability to the Salvation Army, $1,000
c. Receivable from the Salvation Army, $1,000
d. Temporarily restricted contributions of $5,000
ANS: b
United Way reports the cash received as a liability, and distribution to the Salvation Army
as a reduction in the liability. There is no effect on contributions revenue.
4. Topic: Restricted contributions

LO 2
A not-for-profit organization receives cash contributions of $1,000,000 that are donor-
restricted for building a new office. As of year-end, $400,000 of these contributions has
been used for building construction. This information is reported as:
a. $1,000,000 in contribution revenue–permanently restricted on the statement of

activities
b. $1,000,000 balance in long-term assets on the statement of financial position
c. $ 600,000 balance in current assets on the statement of financial position
d. $ 400,000 in contribution revenue–unrestricted on the statement of activities
ANS: b
The $1,000,000 contribution increases long-term assets (restricted cash) and temporarily
restricted net assets. When $400,000 is used for construction, net assets are released—
use restriction, transferring $400,000 from temporarily restricted to unrestricted net
assets. The restricted cash is used for construction (dr construction in progress, cr
restricted cash). Therefore there is a $600,000 balance in restricted cash, which is a long-
term asset, and a $400,000 balance in construction in progress, also a long-term asset, for
a total of $1,000,000 balance in long-term assets.

13-2 Advanced Accounting, 2nd Edition
5. Topic: Contributions of services
LO 2
High school students volunteer their time to provide childcare services at the YWCA.
The fair value of their services is estimated to be $5,000. How does the YWCA report
this information in its statement of activities?
a. Administrative expenses (reduction in unrestricted net assets), $5,000

b. Direct increase in beginning balance of unrestricted net assets, $5,000
c. Contribution revenue (increase in unrestricted net assets) and administrative
expenses (decrease in unrestricted net assets), $5,000
d. The donation of services is not reported
ANS: d
Contributions of services are not reported unless they create or enhance nonfinancial
assets or require specialized skills, are provided by those possessing those skills, and
would otherwise be purchased.
6. Topic: Pledged contributions

LO 2
In 2012, a donor makes a documented promise to contribute $1,000,000 to a not-for-
profit organization in 2013. The donor says the contribution may be used for any
purpose, and follows through on her promise in 2013. How is this donation reported in
the 2012 and 2013 financial statements of the not-for-profit organization? Ignore
interest.
a. 2012: Increase in temporarily restricted net assets for $1,000,000;

2013: Decrease in unrestricted net assets for $1,000,000
b. 2012: Increase in unrestricted net assets for $1,000,000;
2013: Increase in expenses for $1,000,000
c. 2012: Increase in temporarily restricted net assets for $1,000,000;
2013: Decrease in temporarily restricted net assets for $1,000,000
d. 2012: Increase in unrestricted net assets for $1,000,000;
2013: No change in net assets
ANS: c

7. Topic: Contributions and investments
LO 2, 3
A donor contributed $1,000,000 in cash to the American Red Cross in 2013. The donor
specified that the contribution be held as a permanent endowment, and income from
related investments be used to help victims of tsunamis. The Red Cross invested the
$1,000,000 in securities in 2013. During 2014, dividend income of $50,000 was earned.
How did the Red Cross report this on its 2014 statement of activities?
a. $50,000 increase in temporarily restricted net assets

b. $50,000 increase in temporarily restricted net assets; $50,000 decrease in
temporarily restricted net assets and $50,000 increase in unrestricted net assets for
net assets released from use restrictions
c. $50,000 increase in permanently restricted net assets
d. $50,000 increase in unrestricted net assets, $1,000,000 decrease in permanently
ANS: a
The donation is an increase in permanently restricted net assets. Dividend income of

$50,000 is reported as temporarily restricted until spent for tsunami relief.
Use the following information to answer questions 8 – 15 below:
The Lancaster Relief Foundation (LRF) is a privately funded voluntary health and welfare
organization. Its trial balance at the beginning of 2014 is as follows:
Dr (Cr)
Cash $395,000
Contributions receivable 460,000
Investments 200,000
Buildings & equipment, net 540,000
Accounts payable (160,000)
Unrestricted net assets (680,000)
Temporarily restricted net assets (415,000)
Permanently restricted net assets (340,000)
The following events occurred during 2014:
1. Cash contributions of $3,000,000 were received. They consist of:

(a) $1,500,000 received from the public as general contributions,
(b) $600,000 received from a grant to support programs to finance higher
education for single parents, and
(c) $900,000 received as a permanent endowment; this money was invested in
securities, and the donor specified that investment income and gains and
losses are to be used to support LRF’s programs to provide tutoring in the
public schools.

2. LRF received payments of $50,000 on contribution promises made in previous
years. The present value of these promises increased by $35,000. Additional
documented promises, with a present value of $95,000, were received at the end
of 2014.
3. At the end of 2014, the fair value of LRF’s investments in 1(c) is $920,000.
Investment income on the securities is $25,000, all received in cash. The
investments on hand at the beginning of the year were investment of excess cash,
sold during 2014 for $210,000.
4. Expenses for the year were as follows:
Educational programs $ 1,050,000

Financial relief programs 930,000
Administrative 370,000
Fund-raising 65,000
Total $2,415,000
These expenses were paid in cash, except for $200,000 still owing on purchased
supplies, salaries, etc., and $40,000 in depreciation on buildings and equipment,
which is included as part of administrative expense. All unpaid bills outstanding
at the beginning of the year were paid in 2014.
$20,000 of the investment income in 3. above was used for tutoring expenditures,
and $450,000 of the government grant in 1(b) above was used for financial relief
programs. All these expenditures are already included in the expenses listed
above.
8. Topic: Temporarily restricted contributions

LO 2
On LRF’s 2014 statement of activities, the net increase in temporarily restricted net
assets is:
a. $280,000
b. $775,000
c. $210,000
d. $255,000
ANS: d
$600,000 + $35,000 + $95,000 - $50,000 - $470,000 + $20,000 + $25,000 = $255,000

LO 2
On LRF’s 2014 statement of activities, total net assets released from use restrictions are:
a. $450,000
b. $520,000
c. $470,000
d. $ 20,000
ANS: c
$20,000 + $450,000 = $470,000
10. Topic: Unrestricted net assets, statement of activities

LO 2
On LRF’s 2014 statement of activities, the net change in unrestricted net assets is:
a. $(395,000)
b. $(385,000)
c. $ 135,000
d. $ 85,000
ANS: b
$1,500,000 + $50,000 + $20,000 + $450,000 + $10,000 - $2,415,000 = $(385,000)
11. Topic: Permanently restricted net assets, statement of activities

LO 2
On LRF’s 2014 statement of activities, the net change in permanently restricted net assets
is:
a. $900,000
b. $910,000
c. $920,000
d. $930,000
ANS: a
The original cash contribution is permanently restricted.

12. Topic: Statement of cash flows
LO 1
On LRF’s 2014 statement of cash flows, cash from contributions, reported in cash from
operating activities using the direct method, is:
a. $2,250,000
b. $2,000,000
c. $2,150,000
d. $2,100,000
ANS: c
$2,100,000 + $50,000 = $2,150,000

LO 1
On LRF’s 2014 statement of cash flows, cash paid for operating expenses, reported in
cash from operating activities using the direct method, is:
a. $2,575,000
b. $2,175,000
c. $2,335,000
d. $2,415,000
ANS: c
$2,175,000 + $160,000 = $2,335,000

LO 1
On LRF’s 2014 statement of cash flows, a reconciliation of the change in net assets to net
cash from operating activities includes all of the following except:
a. Subtract unrealized gains on investments, $20,000

b. Subtract endowment contribution, $900,000
c. Add depreciation, $40,000
d. Add increase in contributions receivable, $80,000
ANS: d
The increase in contributions receivable is subtracted, not added.

LO 1
On LRF’s 2014 statement of cash flows, cash from financing activities is:
a. $0
b. $900,000
c. $920,000
d. $690,000
ANS: b
The permanent endowment is the only financing cash flow for 2014.
Use the following information to answer questions 16 – 20 below:
Northsouth Services is a private voluntary health and welfare organization that was established
on January 2, 2013 to provide meals and temporary lodging for abused families. The following
events occurred in 2013:
a. $300,000 was received in federal grants. Of this amount, $250,000 was designated by
the government for acquiring a facility and equipment. The rest was unrestricted.
b. In a fund-raising campaign, $80,000 was collected in cash. The funds are not restricted.
Documented pledges of $10,000 are outstanding at year-end, assumed to be 100%
collectible.
c. A private foundation contributed marketable securities valued at $200,000, with the
stipulation that the securities be held intact. The income is unrestricted. Income earned
on these investments in 2013 is $4,000, and the marketable securities are worth $185,000
at year-end.
d. A building was purchased for $100,000, and equipment was purchased for $25,000, all
financed by the federal grant.
e. Expenditures for the year were as follows, paid in cash:
General services $10,000
Program services 50,000
Fund-raising 2,000
Total $62,000
f. Volunteers contributed services as follows:
Secretarial and administrative help (general services), requiring specialized skill, was
donated by individuals skilled in those areas. Northsouth would have had to hire personnel
to do the work if it was not donated. Market value of the services: $35,000. Volunteers
helped in cleaning up the new facility and in advertising the programs to the community.
No experience was necessary to provide these services. Market value of the services (at
minimum wage): $5,000 for general services, and $10,000 for program services.

16. Topic: Statement of activities, investment income
LO 3
On Northsouth’s statement of activities for 2013, investment income (loss) reported as an
increase (decrease) in unrestricted net assets is:
a. $(15,000)
b. $(11,000)
c. $0
d. $ 4,000
ANS: d
Investment income from the marketable securities is unrestricted.
17. Topic: Statement of activities, contributions of securities

LO 3
On Northsouth’s statement of activities for 2013, the change in permanently restricted net
assets is:
a. $0
b. $185,000
c. $189,000
d. $200,000
ANS: b
$200,000 contribution of securities less decline in value of $15,000 = $185,000
18. Topic: Expenses and contributions of services, statement of activities

LO 2
On Northsouth’s statement of activities for 2013, total general services expenses are:
a. $10,000
b. $40,000
c. $45,000
d. $50,000
ANS: c
$10,000 + $35,000 = $45,000

19. Topic: Statement of activities, temporarily restricted contributions
LO 2
On Northsouth’s statement of activities for 2013, what amount is shown as assets
released from restrictions?
a. $0
b. $ 25,000
c. $100,000
d. $125,000
ANS: d
$100,000 + $25,000 = $125,000
20. Topic: Statement of activities, unrestricted contributions

LO 2
On Northsouth’s statement of activities for 2013, what is the net increase in unrestricted
net assets?
a. $ 72,000
b. $117,000
c. $168,000
d. $197,000
ANS: d
$50,000 + $80,000 + $4,000 + $35,000 + $125,000 – $45,000 – $50,000 – $2,000

= $197,000

21. Topic: Investments
LO 3
At the beginning of 2014, a private NFP organization receives a cash endowment of
$5,000,000. The donor states that the organization must retain the endowment, and cash
income on its investment must be used for specific program activities. The endowment is
invested in securities. During 2014, investment income is $100,000. The securities have
a fair value of $5,500,000 at year-end. The organization has not spent any of the
$100,000 by year-end. How is this information reported in the organization’s statement
of activities for 2014?

permanently temporarily unrestricted
restricted net assets restricted net assets net assets
a. $5,000,000 $100,000 $500,000
b. 5,500,000 0 100,000
c. 5,000,000 0 600,000
d. 5,500,000 100,000 0
ANS: a

LO 3
At the beginning of 2014, a private NFP organization receives securities with a fair value
of $5,000,000. The donor states that the organization must retain the securities, and cash
income on its investment must be used for specific program activities. During 2014,
investment income is $100,000. The securities have a fair value of $5,500,000 at year-
end. The organization has not spent any of the $100,000 by year-end. How is this
information reported in the organization’s statement of activities for 2014?

permanently temporarily unrestricted
restricted net assets restricted net assets net assets
a. $5,000,000 $100,000 $500,000
b. 5,500,000 0 100,000
c. 5,000,000 0 600,000
d. 5,500,000 100,000 0
ANS: d

LO 3
In 2012, a donor contributed common stock worth $500,000 to Habitat for Humanity,
with the stipulation that the shares be retained intact, and any dividend income be used to
support building projects in inner city neighborhoods in Nashville, TN. The shares
decline in value by $20,000 during 2013. How is this reported on Habitat for
Humanity’s 2013 statement of activities?
a. Decrease in permanently restricted net assets, $20,000

b. Decrease in temporarily restricted net assets, $20,000
c. Decrease in unrestricted net assets, $20,000
d. Not reported
ANS: a
24. Topic: Statement of activities, colleges and universities

LO 4
A university reports the following information:
Gross tuition billings to students…………………….. $35,000,000

Tuition scholarships granted to students………...…… 12,000,000
Tuition waivers for teaching assistants………………. 4,000,000
Estimated uncollectible tuition revenue……………… 300,000
On the university’s statement of activities, net tuition revenue is:
a. $22,700,000
b. $23,000,000
c. $25,000,000
d. $34,700,000
ANS: b
$35,000,000 -– $12,000,000 = $23,000,000

Use the following information to answer questions 25 and 26:
A hospital reports the following information:
Estimated bad debts—non-charity patients………………………... 300,000

Estimated bad debts—charity patients…………………………….. 1,200,000
Contractual adjustments—third party payors………….…………… 900,000
Gross billings to non-charity patients……………………………… 1,000,000
Gross billings to insurance companies and Medicare/Medicaid…… 5,000,000
Charity care, estimated retail value………………………………… 1,200,000
Charity care, cost…………………………………………………… 800,000
25. Topic: Statement of activities, hospitals

LO 4
Net patient service revenue, as reported on the hospital’s statement of activities, is:
a. $7,200,000
b. $6,000,000
c. $5,100,000
d. $6,300,000
ANS: c
$1,000,000 + $5,000,000 – $900,000 = $5,100,000
26. Topic: Statement of activities, hospitals

LO 4
Charity care is reported on the hospital’s statement of activities as:
a. Revenue of $1,200,000 and bad debt expense of $1,200,000.

b. An expense of $800,000.
c. As revenue of $1,200,000 and expense of $800,000.
d. Revenue of $1,200,000 and expense of $2,000,000.
ANS: b
Charity care is reported at cost.

27. Topic: Financial statements
LO 1
Which statement below is required in the audited financial statements of a not-for-profit
organization?
a. Statement of changes in working capital

b. Income statement
c. Statement of changes in fund balances
d. Statement of cash flows
ANS: d

LO 1
What is the “bottom line” for a not-for-profit organization?
a. Net income
b. Comprehensive income
c. Change in net assets
d. Operating profit
ANS: c

LO 1
The operating statement of a not-for-profit organization reports:
a. Revenues, expenditures, and changes in fund balances

b. Changes in unrestricted, temporarily restricted, and permanently restricted net
assets
c. Revenues, expenses, and net income
d. Operating income and operating expense
ANS: b

LO 1
The statement of financial position of a not-for-profit organization has the following
major classifications:
a. Assets, liabilities, and net assets

b. Current funds, restricted funds, liabilities and unrestricted funds
c. Current assets, noncurrent assets, and net assets
d. Unrestricted assets, restricted assets, liabilities, and equity
ANS: a

LO 1
A cash contribution that is in the form of a permanent endowment is categorized in a not-
for-profit’s statement of cash flows as:
a. Cash from operating activities

b. Cash from financing activities
c. Cash from investing activities
d. Supplementary investing and financing activities
ANS: b
32. Topic: Statement of activities

LO 1
Expenses of a not-for-profit organization are reported:
a. As reductions in unrestricted net assets

b. As reductions in unrestricted or temporarily restricted net assets
c. As reductions of temporarily restricted net assets
d. As reductions in permanently restricted net assets
ANS: a

LO 1
Resources set aside during the year by the board of directors for the replacement of plant
assets are reported in the statement of activities as:
a. A reduction in unrestricted net assets

b. An increase in permanently restricted net assets
c. An increase in temporarily restricted net assets
d. Not reported in the statement of activities
ANS: d

LO 1
In the statement of cash flows of a not-for-profit organization, a reconciliation must be
shown. What is the nature of this reconciliation?
a. Change in net assets to cash from operating activities

b. Net income to cash from operating activities
c. Change in net assets to cash from investing activities
d. Net income to cash from investing activities
ANS: a

LO 1
NFP organizations present their expenses in what categories?
a. Programs, administrative, and fund-raising

b. Operating and nonoperating
c. Unrestricted, temporarily restricted, and permanently restricted
d. Salaries, utilities, and programs
ANS: a
36. Topic: NFP reporting standards

LO 1
Reporting standards for private NFP organizations are promulgated by the:
a. SEC
b. GASB
c. AICPA
d. FASB
ANS: d
37. Topic: Contribution of services

LO 2
You are a CPA and you donate your services to prepare the financial statements and Form
990 for your favorite charity. How does the charity report your donation?
a. Not reported
b. Expense, as a reduction in temporarily restricted net assets
d. Contribution, as an increase in permanently restricted net assets
ANS: c

LO 2
Students and faculty advisors donate their time to the activities of Beta Alpha Psi. How
does Beta Alpha Psi report this contribution?
a. Not reported
b. Expense, as a reduction in temporarily restricted net assets
d. Contribution, as an increase in permanently restricted net assets
ANS: a

LO 2
A licensed contractor donates services to build an addition to Make-A-Wish Foundation’s
facilities. How is this reported in the Foundation’s financial statements?
a. Not reported
b. Increase in contributions—unrestricted, and expense, as a reduction in
unrestricted net assets on the statement of activities
c. Increase in assets on the balance sheet and increase in contributions—unrestricted
on the statement of activities
d. Net assets released, as a decrease in temporarily restricted net assets and increase
in unrestricted net assets, and expense, as a reduction in unrestricted net assets.
ANS: c

LO 2
Make-A-Wish Foundation reports contributions receivable on its balance sheet, related to
promises to be received over several years. How is this receivable measured?
a. Present value of future contributions

b. Gross contributions
c. Gross contributions, adjusted for expected uncollectibles
d. Present value of future contributions, adjusted for expected uncollectibles
ANS: d

LO 2
The Red Cross receives donations for Haiti disaster relief in fiscal 2011. The Red Cross
then pays money out for disaster relief efforts in Haiti during fiscal 2012. What is the net
effect of these transactions on each of Red Cross’ categories of net assets in fiscal 2012?
a. Reduction in temporarily restricted net assets; no net effect on unrestricted or

b. Reduction in permanently restricted net assets and increase in temporarily
restricted net assets; no net effect on unrestricted net assets
c. Increase in temporarily restricted net assets and decrease in unrestricted net
assets; no net effect on permanently restricted net assets
d. Reduction in unrestricted net assets; no net effect on temporarily or permanently
ANS: a

42. Topic: Conditional contributions
LO 2
Beta Alpha Psi receives donations as part of a capital campaign to raise money to build
new facilities. They need to raise $10 million in order to start construction, and they
haven’t reached that goal yet. The donations received are reported as increases in:
a. Temporarily restricted net assets

b. Liabilities
c. Permanently restricted net assets
d. Unrestricted net assets
ANS: b

LO 2
In 2014, a donor agrees, in writing, to donate $20,000 per year to a not-for-profit
organization over the next five years. Nothing is received in 2014. How is this donation
reported on the 2014 financial statements of the organization?
a. Increase in unrestricted net assets on the statement of activities

b. Increase in temporarily restricted net assets on the statement of activities
c. Liability on the balance sheet
d. Not reported
ANS: b
44. Topic: Contributions received on behalf of others

LO 2
The United Way collects contributions donor-restricted for the local YMCA, and then
distributes the contributions to the YMCA. How does United Way report this in its
a. Not reported
b. Revenue increases unrestricted net assets, expense decreases unrestricted net
assets
c. Revenue increases temporarily restricted net assets, net assets released decreases
temporarily restricted net assets and increases unrestricted net assets
d. Revenue increases temporarily restricted net assets, net assets released decreases
temporarily restricted net assets.
ANS: a

LO 2
A donor makes a documented promise to contribute to Habitat for Humanity. Increases
in the present value of this promise
a. are not reported.

b. increase unrestricted net assets.
c. increase permanently restricted net assets.
d. increase temporarily restricted net assets.
ANS: d

LO 2
The 2011 balance sheet of Beta Alpha Psi has a balance of about $160,000 in temporarily
restricted net assets. In the footnotes, about $15,000 of this amount is labeled “diversity
awards.” This balance is:
a. Amounts spent to date for diversity awards

b. Money contributed for diversity awards that has not yet been spent
c. The amount of total donations to date for diversity awards
d. Money set aside by the Board of Beta Alpha Psi for diversity awards
ANS: b

LO 3
How are investments reported by a not-for-profit organization?
a. Shown at cost; gains and losses appear on the statement of activities when the
investment is sold
b. Shown at market; unrealized gains and losses are reported on the balance sheet
and reclassified to the statement of activities when the investment is sold
c. Shown at market; unrealized gains and losses are reported on the statement of
activities as market value changes
d. Shown at cost; gains and losses are reported on the balance sheet as direct
adjustments of permanently restricted net assets
ANS: c

LO 3
Increases in the value of investments made using permanently restricted endowment
resources are typically shown in the external financial statements of a not-for-profit
organization as:
a. An increase in permanently restricted net assets

b. An increase in temporarily restricted net assets
c. An increase in unrestricted net assets
d. An increase in unrestricted net assets, unless such value changes are donor-
restricted
ANS: d
49. Topic: Derivative investments

LO 3
NFP organizations like the Red Cross invest in derivatives to hedge their financial risks.
How does the accounting for hedge investments differ from the accounting for other
investments?
a. There is no difference.
b. Unrealized gains and losses on hedge investments are reported as changes in
permanently restricted net assets, while unrealized gains and losses on other
investments are not reported.
c. Unrealized gains and losses on hedge investments are not reported, while
unrealized gains and losses on other investments are reported as a change in
d. Unrealized gains and losses on hedge investments are deferred on the balance
sheet until the hedged item is reported on the statement of activities, while
unrealized gains and losses on other investments are reported as a change in
ANS: a

50. Topic: Hedge investments
LO 3
What is an accurate statement regarding NFP hedging of forecasted transactions?
a. Similar to governments, NFPs can report changes in the value of derivatives used
for hedging as deferred inflows/outflows on the balance sheet.
b. Similar to businesses, NFPs can report changes in the value of derivatives used
for hedging as adjustments to OCI.
c. The FASB allows hedge investments to be reported at cost.
d. NFP reporting standards do not allow any special hedge accounting for hedges of
forecasted transactions.
ANS: d
51. Topic: Private colleges and universities

LO 4
A private college or university reports tuition adjustments for scholarships as:
a. A reduction in tuition revenue

b. An expense
c. A reduction in temporarily restricted net assets
d. A reduction in permanently restricted net assets
ANS: a
52. Topic: Private hospitals

LO 4
Private hospitals report charity care
a. at cost.
b. at fair value, net of expected uncollectibles.
c. at present value.
d. at present value, net of expected uncollectibles.
ANS: a

53. Topic: NFP mergers
LO 4
An NFP organization that relies mostly on donations acquires another NFP organization.
The acquisition cost is in excess of the fair value of identifiable net assets acquired. This
excess is
a. reported as goodwill.
b. reported as a charge in the statement of activities.
c. not reported.
d. reported as an inherent contribution received on the statement of activities.
ANS: b
54. Topic: Evaluation of NFP financial statements

LO 5
Critics of the FASB’s reporting requirements have one common concern, which is that
current GAAP for not-for-profit organizations:
a. Overstate net assets available for spending

b. Do not report undocumented pledges of contributions
c. Understate the actual value of investments
d. Do not recognize all donations of services
ANS: a
55. Topic: Evaluation of not-for-profit financial statements

LO 5
Criticisms of the FASB’s reporting requirements for not-for-profit organizations include
all of the following except:
a. Contributions are recognized in the period promised, overstating resources

available to fund current activities.
b. Donor-restricted contributions are not recognized as increases in net assets until
the period the restrictions are met, understating resources available to fund
current activities.
c. Investment income is reported as an increase in unrestricted net assets unless
donor restricted, although the income will typically be used only for restricted
activities.
d. Unrealized gains on investments are shown as increases in net assets, although
these gains are not available to fund current activities.
ANS: b

56. Topic: Evaluation of NFP financial statements
LO 5
Which is most likely your major concern when auditing an NFP organization?
a. Overstatement of pledges receivable

b. Understatement of fund-raising expenses.
c. Overstatement of investment income.
d. Understatement of cash contributions.
ANS: b

PROBLEMS
1. Topic: Recording transactions

LO 1, 2
Below are some of the New York State Society of CPAs (NYSSCPA) transactions for
2013.
1. The organization receives cash contributions for general use.

2. Cash contributions donor-designated for support of programs promoting the accounting
profession among high school students are received.
3. A large cash balance has accumulated, and the Board of Directors decides to
designate it for undergraduate scholarships.
4. Excess cash is invested in low-risk interest-bearing securities.
5. Interest income is earned on the securities in 4. above
6. In 2012 a donor signed a contract promising to contribute $1,000,000 to the
NYSSCPA at the end of five years. The contract was reported at present value,
using an appropriate discount rate. Which category of net assets is affected in
2013, if any?
7. A contractor provides volunteer services to build new office facilities.
8. A donor gives $10,000,000 to the NYSSCPA. The donor specifies that the
endowment cannot be spent, but income from its investment is to be used for
scholarships.
9. NYSSCPA makes principal payments on its capital lease obligations.
10. Interest income is earned on investments made with the endowment money
described in 8. above.
Required
For each item above, indicate whether the transaction affects:
Unrestricted net assets (UR)

Temporarily restricted net assets (TR)
Permanently restricted net assets (PR)
Does not affect net assets (N)
ANS:
1. UR
2. TR
3. N
4. N
5. UR
6. TR
7. UR
8. PR
9. N
10. TR

2. Topic: Recording contributions
LO 2
A not-for-profit organization has the following transactions:
a. A local business promises to match any contributions received over $500,000

(contributions have not yet reached that level).
b. Students donate their time to make phone calls to alumni for the purpose of
fundraising.
c. A donor pledges an amount to be paid in a future year (not yet received). The
pledge is unconditional and in writing.
d. Employees of local businesses contributed their time to the organization by doing
odd jobs.
e. A citizen donates $1 million. The principal is to remain intact, and the income is
restricted to a particular program (no income has yet been earned).
f. An individual donates $50,000 specifically for the purpose of acquiring a van for
the senior citizens program. The contribution is given this year, but the van is not
expected to be purchased until next year.
Required
For each of these transactions, would it be reported currently as contribution revenue
(increase in net assets) in the statement of activities of a private not-for-profit
organization? Indicate your answer ("yes" or "no"), and justify your answer for each
situation.
ANS:
a. No -- conditional contributions are not considered to be revenue until the

condition is met.
b. No -- donated services are not contributions unless they involve skilled services.
c. Yes -- unconditional pledges are current revenue.
d. No -- same justification as b.
e. Yes -- endowment contributions are increases in permanently restricted net assets.
f. Yes -- purpose-restricted contributions are increases in temporarily restricted net
assets.

3. Topic: Recording transactions
LO 1, 2
Below are some of Habitat for Humanity’s transactions for 2014.
a. Habitat for Humanity pays its employees.

b. College students spend their spring break building houses for Habitat for
Humanity.
c. A donor contributes $200,000 in cash with no restrictions. The Board of
Directors decides to set this amount aside to be used to acquire a bulldozer.
d. Habitat for Humanity invests excess cash in short-term debt securities.
e. Interest income is earned on the securities in d. above.
f. A donor signs a contract promising to contribute $10,000 per year for the next
three years. No cash has yet been received.
g. A CPA provides volunteer services to prepare Habitat for Humanity’s required
financial statements and tax filings.
h. During a calling campaign, Habitat for Humanity receives pledges from the
public.
i. A donor contributes $200,000 and specifies that it be used to buy appliances for
houses under construction in Cleveland.
j. A donor gives $10,000,000 to Habitat for Humanity. The endowment cannot be
spent, but income from its investment is to be used to build and renovate houses
in New Orleans.
Required
For each item above, indicate whether it affects:
Unrestricted net assets (UR)

Temporarily restricted net assets (TR)
Permanently restricted net assets (PR)
Does not affect net assets (N)
Also indicate if the item increases or decreases the specified net assets. If there is no
effect, just indicate N. If there is both an increase and a decrease, indicate both.
ANS:
a. UR decrease
b. N
c. UR increase
d. N
e. UR increase
f. TR increase
g. UR increase and decrease
h. N
i. TR increase
j. PR increase

LO 1, 2
Below are transactions of not-for-profit organizations.
a. Cash contributions totaling $1,000,000 are received. Although the donors

indicate no restrictions, the Board of Directors of the organization decides to
restrict the contributions to financing a new community center.
b. A donor signs an agreement to donate $100,000 each year for the next 10 years.
No cash has been received yet.
c. A lawyer donates services valued at $4,000 to the organization.
d. Faculty advisors donate their services, valued at $1,000,000, to organize Beta
Alpha Psi activities.
e. The organization invests permanently restricted contributions in marketable
securities.
f. Last year, a donor contributed $1,000,000, with specific instructions that the
money was to be used for student scholarships. This year $100,000 of this money
is disbursed to students. Your answer pertains to this year’s statement of
activities.
g. A building contractor donates services to build a community center. The services
are valued at $1,000,000.
Required
Below is a list of categories on the statement of activities of a not-for-profit organization.
1. Contributions revenue – unrestricted
2. Contributions revenue – temporarily restricted
3. Contributions revenue – permanently restricted
4. Expenses – reduction in unrestricted net assets
5. Net assets released from restrictions–reduction in temporarily restricted net assets
6. Net assets released from restrictions–increase in unrestricted net assets
7. Does not appear on the statement of activities
For each of the transactions a – g above, indicate where it appears, if at all, on the
statement of activities. The item may be reported in one place or more than one place.
Use the numbers 1-6 to indicate the item’s location(s). Use number 7 to indicate that the
item does not appear on the statement of activities.
ANS:
a. 1
b. 2
c. 1, 4
d. 7
e. 7
f. 4, 5, 6
g. 1

5. Topic: Contributions received on behalf of others
LO 2
During 2014, United Way receives $1,000,000 in cash contributions that are
donor-designated for Habitat for Humanity. United Way distributes the cash to
Habitat for Humanity.
Required
Prepare the journal entries made by United Way and Habitat for Humanity to
record the above events.
ANS:
United Way receives the contributions:
United Way records:

Cash 1,000,000
Liability to other
organizations 1,000,000
Habitat for Humanity records:

Receivable from United Way 1,000,000
Contributions revenue 1,000,000
United Way distributes the contributions to Habitat for Humanity:
United Way records:

Liability to other organizations 1,000,000
Cash 1,000,000
Habitat for Humanity records:

Cash 1,000,000
Receivable from United
Way 1,000,000

6. Topic: Life income contributions
LO 2
On January 2, 2013, a contributor to a not-for-profit organization, with a
remaining life expectancy of 15 years, donates $5,000,000 under a life income
agreement. The organization invests the donation in debt securities, which earn a
3% return during 2013. The donor is paid at year-end, as required by the
agreement.
Required
Prepare the journal entries to record the above events.
ANS:
Cash 5,000,000
Contributions revenue –
temporarily restricted 5,000,000
Investments 5,000,000
Cash 5,000,000
Cash 150,000
Life income payable 150,000
$150,000 = 3% x $5,000,000
Life income payable 150,000

Cash 150,000

7. Topic: Annuity contributions
LO 2
On January 1, an alumnus of privately funded Hudson University donates $5,000,000
under an annuity agreement, whereby Hudson agrees to pay the donor $100,000 annually
for life. The donor's life expectancy is 20 years, and a 5% discount rate is deemed
appropriate. The present value of an ordinary annuity of 20 years at 5% is 12.46.
Required
Prepare the journal entries to record the following events:
a. The donor makes the contribution.
b. The first year's payment is made to the donor.
ANS:
a.
Cash 5,000,000
Annuity payable 1,246,000
Contribution revenue-
temporarily restricted 3,754,000
$1,246,000 = $100,000 x 12.46
b.
Net assets released from
restrictions-temporarily
restricted 62,300
Net assets released from
restrictions-unrestricted 62,300
$62,300 = $1,246,000 x 5%
Interest expense 62,300

Annuity payable 37,700
Cash 100,000

LO 1, 2
Turning Point Services (TPS) was established on January 2, 2014 to provide training
programs for those in career transition. TPS is a private not-for-profit organization. The
following events occur in 2014:
1. $1,000,000 was received in government funding, in the form of grants. Of this

total, $600,000 was designated by the government for acquiring a building,
$200,000 was designated to be used to set up computer training programs, and the
rest was unrestricted.
2. TPS received $200,000 in cash contributions and $130,000 in documented

pledges to be received in 2015. All contributions are undesignated.

General Training Fund
Services Programs raising
Salaries $ 40,000 $ 50,000 $20,000
Supplies 30,000 75,000 10,000
Utilities 30,000 25,000 5,000
Travel -- -- 15,000
Total $100,000 $150,000 $50,000
All of the above expenses were paid in cash, except for $25,000 still owing to
suppliers. Of the $150,000 in expenses for training programs, $78,000 was
financed by the government grant described in 1. above.
4. Services were donated as follows (fair values of services provided are shown in
parenthesis):
Audit by local CPA ($5,000)

High school students distributed fliers to the public ($2,000)
Contractor drafted plans for the building ($15,000)
Required
Prepare a 2014 statement of activities for Turning Point Services.

ANS:
Turning Point Services
For the year ended December 31, 2014
Change in Change in
Unrestricted Temporarily
Net Assets Restricted Net Assets
Revenues, gains and other support:
Grants $ 200,000 $ 800,000
Contributions 200,000 130,000
Services 20,000
Net assets released from program restrictions 78,000 (78,000)
Total 498,000 $ 852,000
Expenses
General services 105,000
Training programs 150,000
Fund-raising 50,000 _______
305,000 _______
Change in net assets $193,000 $ 852,000

LO 1, 2
Audubon Clinic, a private voluntary health and welfare organization, conducts two types
of programs: a medical services program and a community information services program.
The following transactions occurred during the year ended June 30, 2014:
1. Received the following contributions:

Unrestricted cash contributions $500,000
Cash donor-restricted to medical services 80,000
Cash donor-restricted to building campaign 250,000
2. Received the following pledges (at gross):

Unrestricted 50,000
Pledges are expected to be collected within one year and are 95% collectible.
3. Received the following unrestricted cash revenues:

Membership dues $ 30,000
4. Program and services expenses incurred:

Medical services $ 80,000
Community information services 42,000
General administration 250,000
Fund-raising 60,000
$45,000 of medical services expenditures were paid for with contributions donor-
restricted to the medical services program.

5. Buildings and equipment purchased:
With unrestricted cash $ 30,000
With building campaign cash 100,000
6. Depreciation for the year was allocated as follows:

Medical services $ 6,000
Community information services 2,000
General administration 4,000
Fund raising 1,000
7. Non-cash contributions were as follows:

Fair value
Legal and accounting services performed by
licensed donors $ 15,000
Building services performed by licensed contractors 75,000
Required
Prepare a statement of activities for Audubon Clinic for the year ended June 30, 2014. A
natural classification of expenses is not required. Beginning net asset balances for the
year were: $200,000 for unrestricted net assets, and $150,000 for temporarily restricted
net assets.
ANS:
Audubon Clinic
Year ended June 30, 2014
Temporarily
Unrestricted restricted net
net assets assets
Cash contributions $ 500,000 $330,000
Pledged contributions 50,000
Membership dues 30,000
Contributions of services 90,000
Net assets released:
Satisfaction of use restrictions 145,000 (145,000)
Expenses:
Medical services (86,000)
Community information services (44,000)
General administration (271,500)
Fund-raising (61,000) ______
Change in net assets 302,500 235,000
Beginning net assets 200,000 150,000
Ending net assets $502,500 $385,000

10. Topic: Statement of activities, private hospital
LO 1, 2, 4
The following events pertain to Bryant Hospital, a privately funded medical facility, for
2013. Bryant’s accounting year ends December 31.
1. The hospital billed patients for $12,000,000. Cafeteria sales were $500,000.
2. Supplies with a market value of $300,000 were donated. Equipment with a

market value of $700,000 and a book value to the donor of $200,000 was
donated. Bryant reports donations of capital assets as unrestricted.
3. Operating expenses were as follows:

Patient services $9,000,000
Research projects 500,000
Administrative services 3,800,000
General costs 2,000,000
4. A gift of $800,000 was received, to be used in a particular research program.

$200,000 was expended for the research (included in 3. above), and the remainder
was invested in short-term bonds and earned interest of $25,000. The donor
specified that investment income is also restricted for the designated research
purposes.
5. An endowment of $3,000,000 is received. The principal is to be maintained, with

50% of the income restricted for a special research project, and the other 50%
unrestricted. The $3,000,000 is invested, and income of $140,000 is received.
$50,000 is spent on the research project (included in 3. above).
Required
Prepare Bryant Hospital’s statement of activities for 2013. Assume the beginning net
asset balances for the hospital are: $8,000,000 for unrestricted net assets, $2,000,000 for
temporarily restricted net assets, and $2,000,000 for permanently restricted net assets.

ANS:
Bryant Hospital
Year ended December 31, 2013
(000)
Temporarily Permanently
Unrestricted restricted restricted net
net assets net assets assets
Patient revenues $12,000
Cafeteria revenues 500
Donations 1,000 $ 800 $ 3,000
Investment income 70 95
Net assets released from program
restrictions 250 (250)
Expenses:
Patient services (9,000)
Research activities (500)
Administrative (3,800)
General (2,000) ______ _______
Change in net assets (1,480) 645 3,000
Beginning balance 8,000 2,000 2,000
Ending balance $ 6,520 $ 2,645 $ 5,000

11. Topic: Financial statements, private university
LO 1, 2, 4
Following is the trial balance for Prentiss College, a privately funded college, as of
January 1, 2014 (all amounts are in thousands):
Dr Cr
Cash $ 400
Receivables 250
Restricted cash 500
Investments 4,000
Buildings and equipment, net 15,500
Accrued liabilities $ 800
Long-term debt 10,000
Unrestricted net assets 4,000
Temporarily restricted net assets 2,000
Permanently restricted net assets 3,850
Events for 2014 are as follows (in thousands):
1. Tuition and fees are $7,000, of which $2,000 is waived for graduate teaching
assistantships and $1,000 is covered by scholarships. $3,950 is collected in cash.
All tuition and fees relate to 2014.
2. Operating expenses for salaries, utilities, research programs, etc. are $8,500, all
paid in cash. Accrued liabilities of $650 were paid in cash. Depreciation on the
buildings and equipment is $200.
3. An unrestricted state appropriation of $3,000 is received in cash.
4. Cash donations and gifts are as follows:
Restricted to equipment replacement $ 500
Restricted to research projects 300
5. $900 of donor-restricted cash is spent to replace equipment. $100 of donor-
restricted cash is spent for research projects (included in 2. above).
6. $175 is spent to service the long-term debt ($100 for interest, and $75 for
principal; the interest is not included in 2. above).
7. Investment income, received in cash, is $2,000, of which $300 is donor-restricted
to research programs. Donor-restricted cash used for research programs is $250,
included in 2. above. Investments have a fair value of $4,200 at year-end.
Unrealized gains and losses are unrestricted.
Required
a. Present Prentiss College’s statement of activities for 2014.
b. Present Prentiss College’s statement of financial position as of December 31,
2014.

ANS:
a.
Prentiss College
Unrestricted restricted restricted
net assets net assets net assets
Tuition, fees $ 6,000
Appropriations 3,000
Contributions $ 800
Investment income 1,700 300
Unrealized investment gains 200
Net assets released from use
restrictions 1,250 (1,250)
Total revenues and support 12,150 (150)
Operating expenses (10,800) _____ _____
Change in net assets 1,350
(150)
Beginning balance 4,000 2,000 3,850
Ending balance $ 5,350 $ 1,850 $3,850
b.
Prentiss College
December 31, 2014
Cash $ 325
Receivables 300
Restricted cash 100
Investments 4,200
Buildings and equipment, net 16,200
Total assets $21,125
Accrued liabilities $ 150

Long-term debt 9,925
Unrestricted net assets 5,350
Temporarily restricted net assets 1,850
Permanently restricted net assets 3,850
Total liabilities and net assets $21,125

12. Topic: Recording transactions, private hospital
LO 1, 2, 4
The following events occur at a private hospital:
a. A $200,000 donation is received. The donor specifies that the donation is to be

used to support medical research. Any earnings are similarly donor-restricted.
During the year, $8,000 in cash is earned in investment income, and $100,000 is
spent on the designated research.
b. The board of directors of the hospital sets aside funds for replacement of
equipment. Of the amount set aside, $200,000 is used to buy new equipment.
c. Depreciation on plant assets is $350,000.
Required
For each of the above events, prepare the entry or entries necessary for external
reporting. For each entry, specify which category of net assets is affected, if appropriate.
ANS:
a.
Cash 200,000
Contributions (TRNA) 200,000
Cash 8,000
Investment income (TRNA) 8,000
Net assets released (TRNA) 100,000

Net assets released (UNA) 100,000
Expenses (UNA) 100,000

Cash 100,000
b.
Equipment 200,000
Cash 200,000
c.
Depreciation expense (UNA) 350,000
Accumulated depreciation 350,000

13. Topic: Complete financial statements
LO 1, 2
The information below was taken from the records of Geneva Preschool, a private not-
for-profit organization, for the year 2014. Geneva Preschool provides free instruction for
children from low-income families. Its trial balance, January 1, 2014, is as follows:
Debit Credit
Cash $ 100,000
Equipment & furnishings, net 1,500,000
Building, net 3,500,000
Accounts payable $ 200,000
Net assets—unrestricted 3,400,000
Net assets—temporarily restricted _______ 1,500,000
$ 5,100,000 $ 5,100,000
Activities for 2014 are listed below. NOTE: expenses are divided between two
categories on the Statement of Activities: programs and administrative.
1. Unrestricted cash contributions were $4,500,000.

2. On January 1, 2014, a donor made a documented promise of $500,000, to be paid
at the end of 2016 (3 years later). Use a 5% discount rate.
3. Each year, Geneva collects donor-restricted contributions to purchase computers
and software for educational programs. During 2014, $200,000 was received and
$500,000 was spent; $400,000 on computers and $100,000 for software. Geneva
capitalizes the computers as equipment, and expenses the software.
4. Out-of-pocket operating expenses for the year, not including the software in 3.
above, were $4,200,000. The year-end accounts payable balance, all related to
operating expenses, was $150,000. Operating expenses are allocated 70% to
program services and 30% to administrative services.
5. A licensed CPA did all of Geneva’s required financial statements and IRS forms
for free. Fair value of these services is $25,000, classified as administrative.
6. Depreciation for the year on equipment and furnishings was $250,000.
Depreciation on the building was $600,000. All depreciation is split as follows:
50% administrative and 50% program services.
Required
Prepare, in good form, the following financial statements for Geneva Preschool.
a. Statement of activities for 2014.
b. Statement of financial position, December 31, 2014.
c. Statement of cash flows for 2014, using the direct method for the operating
section. Include a reconciliation of change in net assets to cash from operating
activities.

ANS:
Journal entries (not required)
Cash-operations 4,500,000
Contributions – UR 4,500,000

Contributions-TR 431,918
Present value of $500,000 in three years at 5%.

Increase in PV of pledge during 2014.
Cash-operations 200,000
Net assets released-TR 500,000

Net assets released-UR 500,000
Program expenses 100,000

Equipment 400,000
Cash-operations 100,000
Cash-investing 400,000
Accounts payable 50,000

Program expenses 2,940,000
Administrative expenses 1,260,000
Cash-operations 4,250,000
Administrative expenses 25,000

Contributions-UR 25,000

Administrative expenses 425,000
Equipment &
furnishings 250,000
Building 600,000

a.
Geneva Preschool
Statement of activities for 2014
Temporarily
Unrestricted net restricted net
assets assets
Revenues and other support:
Cash contributions $ 4,500,000 $ 200,000
Pledges 453,514
Contributions of services 25,000
Net assets released from restrictions 500,000 (500,000)
___________ ____________
Total revenues and other support $ 5,025,000 $ 153,514
Expenses:
Programs $ 3,465,000
Administrative 1,710,000
__________ ___________
Total expenses 5,175,000 0
Change in net assets (150,000) 153,514
Beginning net assets 3,400,000 1,500,000
Ending net assets $ 3,250,000 $ 1,653,514
b.
Geneva Preschool
Balance sheet, December 31, 2014
Assets Liabilities
Cash $ 50,000 Accounts payable $ 150,000
Equipment & furnishings, net 1,650,000 Net assets
Building, net 2,900,000 Net assets-unrestricted 3,250,000
Net assets-temporarily
________ restricted 1,653,514
Total liabilities and net
Total assets $5,053,514 assets $5,053,514

c.
Geneva Preschool
Statement of cash flows for 2014
Cash from operating activities:
Contributions $ 4,700,000
Less program and administrative costs (4,350,000)
__________
Net cash from operating activities 350,000
Cash for investing activities:
Equipment (400,000)
Change in cash (50,000)
Beginning cash balance 100,000
Ending cash balance $ 50,000
Reconciliation:
Change in net assets $ 3,514
Reconciliation items:
Increase in pledges (453,514)
Decrease in accounts payable (50,000)
Depreciation expense 850,000
Net cash from operating activities $ 350,000

LO 1, 2, 3
The information below was taken from the records of Elmwood Historical Society, a
private not-for-profit organization, for the year 2014. The Society promotes local history
by operating a museum and sponsoring events.
Trial balance, January 1, 2014:
Cash……………………………………………………........ $ 100,000
Investments............................................................................ 950,000
Contributions receivable........................................................ 150,000
State grant receivable............................................................. 1,000,000
Equipment, net……………………………........................... 1,500,000
Building, net………………………………………………… 3,500,000
Accounts payable…………………………………………… (260,000)
Unrestricted net assets……………………………………... (3,500,000)
Temporarily restricted net assets...…………………………. (2,550,000)
Permanently restricted net assets............................................ (890,000)
$ 0
Activities for 2014 are listed below. Expenses are divided between three categories on
the statement of activities: programs, administrative, and fundraising.
1. Unrestricted cash contributions were $4,000,000. Documented promises of

$50,000 were received at the beginning of 2014, but not collected during 2014.
Promises are not donor-restricted to a particular use. Their present value is
$35,000, using a 10% discount rate.
2. Permanently restricted cash endowments of $100,000 were received in 2014. The
cash was immediately invested in securities.
3. The $150,000 in promises outstanding on January 1, 2014 was collected in cash
in early January. The promises are not use-restricted by donors.
4. The state grant receivable listed in the trial balance is restricted to the
development of a special exhibit. The Society received $600,000 of the state
grant, and $300,000 was spent on the exhibit. Of the $300,000 spent, $100,000
was for salaries and wages and $200,000 was for equipment.
5. Donor-restricted resources are accumulated for specific events and museum
exhibits. During the year, $400,000 of donor-restricted cash, received in previous
years, was spent; $350,000 on equipment and $50,000 for supplies and
compensation. The Society expenses the supplies and compensation. All
expenses are program-related.
6. Operating expenses for the year were $4,050,000. The year-end accounts payable
balance, all related to operating expenses, was $280,000. Operating expenses are
allocated 60% to program services, 30% to administrative services, and 10% to
fundraising activities.

7. Depreciation for the year on equipment was $250,000. Depreciation on the
building was $550,000. All depreciation is allocated as follows: 60% to program
services, 35% to administrative and 5% to fundraising.
8. Investment income for the year is $22,000, all received in cash. The fair value of
all the securities held at year-end is $1,090,000. There are no donor restrictions
on investment income or unrealized gains.
Required
Prepare, in good form, the following financial statements for the Elmwood Historical
Society. Use the schedules below and on the following pages.
a. Statement of activities for 2014.

b. Statement of net assets at December 31, 2014.
c. Statement of cash flows for 2012, using the direct method. Include a
reconciliation of the change in net assets to cash from operating activities.
ANS:
Journal entries (not required):
Item 1.
Cash – operating 4,000,000
Contributions
revenue-UR 4,000,000
Contributions
revenue-TR 35,000

Contributions
revenue-TR 3,500
Item 2.
Cash-financing 100,000
Contributions
revenue-PR 100,000
Investments 100,000
Item 3.
Net assets released (time)-TR 150,000
Net assets released
(time)-UR 150,000

Cash-operating 150,000
Contributions
receivable 150,000
Item 4.
State grant receivable 600,000
Net assets released (use)-TR 300,000

Net assets released
(use)-UR 300,000
Program expenses – UR 100,000

Equipment 200,000
Item 5.
Net assets released (use)-TR 400,000
Net assets released
(use)-UR 400,000
Program expenses-UR 50,000

Equipment 350,000
Item 6.
Program expenses-UR 2,430,000
Administrative expenses-UR 1,215,000
Fundraising expenses-UR 405,000
Cash-operating 4,030,000
Item 7.
Program expenses-UR 480,000
Administrative expenses-UR 280,000
Fundraising expenses-UR 40,000
Building 550,000
Equipment 250,000

Item 8.
Investment income-UR 22,000
Investments 40,000
Unrealized gain-UR 40,000
a. Elmwood Historical Society

Year Ended December 31, 2014
Revenues and other support:
Cash contributions $ 4,000,000 $ 100,000
Investment income 22,000
Unrealized investment gains 40,000
Promises made this year $ 35,000
Change in the PV of promises 3,500
from time restrictions 150,000 (150,000)
from use restrictions 700,000 (700,000) _______
Total revenues and other support 4,912,000 (811,500) 100,000
Expenses:
Programs 100 + 50 + 2430 +
480 3,060,000
Administrative 1215 + 280 1,495,000
Fund-raising 405 + 40 445,000 _______ _______
Total expenses 5,000,000 _______ _______
Change in net assets (88,000) (811,500) 100,000
Beginning net assets 3,500,000 2,550,000 890,000
Ending net assets $3,412,000 $1,738,500 $990,000

b. Statement of Net Assets
December 31, 2014
ASSETS LIABILITIES
Investments 1,090,000
Contributions receivable 38,500 NET ASSETS
Unrestricted
State grant receivable 400,000 net assets 3,412,000
Equipment, net 1,800,000 net assets 1,738,500
Permanently
Building, net _2,950,000 restricted net assets 990,000
Total $6,420,500 Total $6,420,500
c. Statement of Cash Flows

Year Ended December 31, 2014

Contributions 4,000 + 150 $ 4,150,000
Grant 600,000
Operating expenses 100 + 50 + 4,030 (4,180,000)
Total cash from operating activities 592,000
Equipment 200 + 350 (550,000)
Investments (100,000)
Total cash from investing activities (650,000)
Cash from financing activities:
Endowment 100,000
Total cash from financing activities 100,000
Change in cash 42,000

Reconciliation of change in net assets to cash from operating activities:
Change in net assets $ (799,500)

Decrease in contributions receivable -35 – 3.5 + 150 111,500
Decrease in grant receivable 600,000
Increase in accounts payable 20,000
Endowment (100,000)
Depreciation expense 800,000
Unrealized gain on investments (40,000)
Cash from operating activities $ 592,000

LO 3
A not-for-profit private community organization holds long-term investments at
December 31, 2014 as follows:
December 31, 2014

market value
Investment in bonds $350,000
Investment in IBM equity securities 100,000
Investment in Apple equity securities 260,000
The bonds were donated several years ago. The donor specified that the bonds be held as
a permanent endowment, with investment income, gains and losses to be used for
neighborhood recreational programs. The bonds were worth $340,000 at the date of
donation.
The IBM shares were purchased for $110,000, using permanently restricted
contributions. The donor specified that income, gains and losses are to be used for
building enhancements.
The Apple shares were purchased with $240,000 in permanently restricted contributions.
The donor specified that investment income, gains and losses are to be used for
rehabilitation programs.

Income on these investments in 2015 and year-end market values are as follows:
12/31/15
2015 income market value
Investment in bonds $ 15,000 $ 332,000
Investment in IBM securities 4,000 115,000
Investment in Apple securities 6,000 200,000
Required
Show how the events of 2015 are disclosed in the statement of activities, specifying the
effect on each category of net assets.
ANS:
Change in
Bond income $ 15,000
IBM dividends 4,000
Apple dividends 6,000
Unrealized loss – bonds $ (18,000)
Unrealized gain – IBM shares 15,000
Unrealized loss – Apple shares (60,000)
16. Topic: Prepare statement of activities

LO 1, 2, 3
The Lower East Side Community Center is a privately funded voluntary health and
welfare organization. Its trial balance as of January 1, 2014 is as follows:
Dr. (Cr.)
Cash.................................................................................... $ 120,000
Pledges receivable.............................................................. 150,000
Buildings & equipment, net............................................... 250,000
Accounts payable............................................................... (180,000)
Unrestricted net assets....................................................... (200,000)
Temporarily restricted net assets....................................... (140,000)
-0-
The following events occurred during 2014:
1. Cash contributions of $1,450,000 were received, consisting of:

 $650,000 received from the public as general contributions, and
 $800,000 received from a state government grant to support health
education

2. $400,000 fair value of securities were received as a permanent endowment, where
the donor specified that income from the securities is to be used to support the
Center’s recreational programs.
3. $150,000 in cash was received from contributors who signed documented
promises to contribute in 2013.
4. At the beginning of 2014, a wealthy resident signed a documented promise to
give $1,500,000 to the Center at the end of five years. The resident did not
specify how the Center is to use the money. The present value of the promise, at
the date of promise, at 5%, is $1,176,000.
5. The Center charged $60,000 to the public for services provided, all collected in
cash.
6. The fair value of the securities in 2. above at the end of 2014 is $380,000.
Investment income on the securities is $15,000, all received in cash.
Health education programs........................................................ $570,000
Recreational programs............................................................... 400,000
Administrative........................................................................... 240,000
Fund-raising.............................................................................. 180,000
These expenses were all paid in cash, except for $40,000 in depreciation on
buildings & equipment (administrative expense), and $130,000 still owing for
salaries, etc. All unpaid bills are accumulated in accounts payable. $165,000 in
bills from last year were paid in 2014.
$12,000 of the investment income in 6. above was used for recreation programs,
and $425,000 of the state government grant in 1(b) above was used for health
education programs. All of these expenditures are included in the expenses listed
above.
Required
Present Lower East Side’s statement of activities for 2014.

ANS:
Lower East Side Community Center
Unrestricted Restricted Restricted
Cash contributions $ 650,000 $ 800,000
Donation of securities $ 400,000
Pledges of contributions 1,234,800
Charges for services 60,000
Unrealized loss (20,000)
Net assets released - time restrictions 150,000 (150,000)
Net assets released - use restrictions 437,000 (437,000)
Expenses:
Health education (570,000)
Recreation programs (400,000)
Administrative (240,000)
Fund-raising (180,000) _______ _ ______
Change in net assets (93,000) 1,462,800 380,000
Beginning net assets 200,000 140,000 0
Ending net assets $ 107,000 $1,602,800 $ 380,000

17. Topic: Audit risk, not-for-profit organizations
LO 5
You are auditing the financial statements of a not-for-profit organization. Identify two
distinct areas of audit risk, and explain why you chose those areas.
ANS:
There are several possibilities, but a major area of potential misreporting is fund-raising
costs. The motivation is to minimize these costs, and not-for-profit organizations can use
various techniques to reduce the amounts reported, such as biasing joint cost allocations
against allocation to fund-raising, and showing revenues net of fund-raising costs. They
may also overstate total expenses by recording contributions on behalf of others as both
revenue and expense, rather than as a liability and payment of a liability.
Not-for-profits also want to keep contributions low, to attract additional donors,

especially if the contributions do not provide immediate spending power. They may
underreport pledges by deciding the pledges do not meet the requirements for reporting,
or by overstating the discount rate used to measure the present value of these promises.
They may also omit noncash contributions, understate donated services, understate the
fair value of in-kind contributions, and so on.
Auditors must also watch carefully that resources are not being misappropriated for
personal use. Expenses must be checked to be sure they are for legitimate organizational
activities, and that costs are market-based.

18. Topic: Prepare statement of activities
LO 1, 2
Transactions for the American Society of Procrastinators during 2013 are as follows:
1. General cash contributions received: $400,000.

2. Cash contributions restricted to workshops to improve time management skills:
$100,000.
3. A successful procrastinator contributed $300,000 in cash as a permanent
endowment. The income from investments of this contribution can be used for
general operations.
4. Investment income earned on the contribution in 3. is $15,000. There is no
change in fair value of the related investments.
5. Documented pledges are recorded, having a present value of $250,000.
6. Increase during 2013 in the present value of recorded pledges: $10,000.
7. Cash received from previously recorded pledges: $22,000.
8. Expenses incurred:
Programs……………….. $350,000
Administration…………. 21,000
Fund-raising……………. 6,000
9. Included in the programs expenses in 8. is $20,000 spent for workshops, using
cash contributions from the past that were restricted for workshop support.
Required
Prepare the American Society of Procrastinators statement of activities for 2013.
ANS:
Revenues and support
Contributions $400,000 $100,000 $300,000
Pledges 250,000
Increase in present value of pledges 10,000
From time restrictions 22,000 (22,000)
From use restrictions 20,000 (20,000) ______
Total revenue and support 457,000 318,000 300,000
Expenses
Programs 350,000
Administration 21,000
Fund-raising 6,000 _______ _______
Total expenses 377,000 0 0
Change in net assets $ 80,000 $318,000 $300,000

LO 1, 2, 3
The Hurricane Relief Association (HRA) is a privately funded voluntary health and
welfare organization that organizes and supports teams of volunteers who help rebuild
homes and businesses, as well as provide counseling services, in areas of the U.S. that
have recently been devastated by hurricanes. Their activities are focused along the
coastlines of eastern Florida, the mid-Atlantic states, and the Gulf states.
HRA’s trial balance as of January 1, 2014 is as follows:
Dr (Cr)
Cash $ 45,000
Pledges receivable 200,000
Buildings and equipment, net 1,600,000
Investments 125,000
Loans payable (520,000)
Total -0-
Transactions and events for 2014 are as follows:
1. Cash contributions of $850,000 were received. They consist of:

(a) $250,000 received from the public as general contributions,
(b) $500,000 federal grant, designated for support of volunteers who come in
to do rehab on homes in specific neighborhoods,
(c) $100,000 endowment, where income and gains and losses on its
investment can be used for any purpose.
2. The $100,000 in (c) above is invested in securities. Investment income for 2014
is $6,000, received in cash. The securities are worth $95,000 at the end of 2014.
3. The pledges receivable outstanding on January 1, 2014 represent the present value
of promises to contribute, discounted at 5%. On December 31, 2014, $75,000
was received related to these promises. All promises are undesignated.
4. The investments on hand at January 1, 2014 represent securities contributed by a

donor in 2013. The securities are permanently restricted. Income from the
securities is donor-restricted to housing relief in Florida. The fair value of the
securities when they were donated was $150,000. Investment income on these
securities for 2014 is $8,000, received in cash. The securities are worth $160,000
at the end of 2014.

Housing programs $ 600,000

Counseling programs 150,000
Administrative 120,000
Fund- raising 60,000
Total $ 930,000
$450,000 of this total represents spending for donor-specified activities. Also

included is $100,000 depreciation on HRA facilities. Of the $830,000 in out of
pocket costs, $50,000 are unpaid at year-end. The $65,000 owed on last year’s
expenses (in the beginning accounts payable account) was paid in cash in 2014.
6. HRA made no payments related to debt. There is no accrued interest on the loans
at year-end.
7. Volunteers supplied services to HRA as follows, with estimated fair value of

services in parenthesis.
(a) Accounting and legal services supplied by CPAs and lawyers, $50,000
(b) Contractor services in building a new wing on HRA facilities, $150,000
(c) Volunteers from local churches collected clothing for hurricane victims,
$10,000
Required
a. Present HRA’s statement of activities for 2014, in good form.
b. Present HRA’s statement of cash flows for 2014, in good form, using the direct
approach for the operating section. Include a reconciliation schedule.
c. Present HRA’s statement of net assets as of December 31, 2014, in good form.

ANS:
a. Hurricane Relief Association

Statement of Activities for 2014
Unrestricted restricted net restricted net
net assets assets assets
Revenues, other support, unrealized
gains and losses:
Contributions $250,000 $500,000 $100,000
Investment income 6,000 8,000
Unrealized gains & losses (5,000) 35,000
Change in pledge value 10,000
Donated services 200,000
from use restrictions 450,000 (450,000)
Expenses:
Housing programs (600,000)
Counseling programs (150,000)
Administrative ($120,000 + $50,000) (170,000)
Fund-raising (60,000) _______ _______
Change in net assets (4,000) (7,000) 135,000
Beginning net assets 385,000 875,000 125,000
Ending net assets $381,000 $868,000 $260,000

b. Hurricane Relief Association
Statement of Cash Flows for 2014
Cash for operating activities:
Contributions ($250,000 + $500,000 + $75,000) $ 825,000
Investment income ($6,000 + $8,000) 14,000
Expenditures ($780,000 + $65,000) (845,000)
Net cash for operating activities $ (6,000)

Securities (100,000)

Endowment 100,000
Reconciliation of change in net assets to cash for operating activities for 2014
Total change in net assets for 2014 $ 124,000
Adjustments:
Endowment (100,000)
Unrealized loss 5,000
Unrealized gain (35,000)
Decrease in pledges receivable 65,000
Decrease in accounts payable (15,000)
Depreciation 100,000
Donated nonfinancial services (150,000)
Cash for operating activities $ (6,000)

c. Hurricane Relief Association
Statement of net assets as of December 31, 2014
ASSETS LIABILITIES
Pledges receivable 135,000 Loans payable 520,000
Buildings and equipment, net 1,650,000 NET ASSETS
Investments 255,000 Unrestricted 381,000
Temporarily restricted 868,000
_______ Permanently restricted 260,000
Total $ 2,079,000 Total $ 2,079,000

LO 1, 2
Accounting Professionals International (API) is a U.S. not-for-profit organization that
promotes the accounting profession. Here is its beginning trial balance for 2014:
Dr (Cr)
Cash $ 80,000
Property and equipment, net 160,000
Investments 100,000
Total -0-
API’s transactions and events for 2014 are as follows:
1. Cash contributions of $175,000 were received. They consist of:
(a) $120,000 cash received from the public as general contributions,

(b) $35,000 in contributions that are restricted to programs that promote
accounting careers to high school students, and
(c) $20,000 in permanent endowments.
2. The contributions receivable outstanding on January 1, 2014 represent the present
value of promises to contribute, discounted at 4%. On December 31, 2014,
10,000 was received related to these promises. These promises are undesignated.

3. Information on the $100,000 in investments on hand at January 1, 2014 is as
follows:
a. $30,000 represents securities contributed by a donor in prior years. The
securities are permanently restricted. The fair value of these securities is
$32,000 at the end of 2014.
b. $10,000 of securities represent the investment of permanently restricted
cash contributions of $10,000 at the end of 2013. The fair value of these
securities is $15,000 at the end of 2014. Income is unrestricted.
c. The remainder of $60,000 of securities are investments of excess cash and
have a fair value of $67,000 at the end of 2014.
d. No securities were sold during 2014.
4. Investments of $20,000 in endowed cash were made during 2014. There are no
unrealized gains and losses on these investments in 2014.
5. Investment income, received in cash, totaled $14,000. Of this amount, $5,000 is
income that is donor- restricted to specific programs.
6. New equipment costing $15,000 was purchased for cash.
Programs $ 150,000
Fund raising 5,000
Management and general 25,000
Total $ 180,000
$60,000 of this total represents spending for donor-specified activities. Also

included is $4,000 depreciation on API property. Accounts payable decreased by
$1,000 in 2014.
8. $4,000 fair value of management and general services were donated, and properly
recognized as contributions per ASC 958.
Required
a. Present API’s Statement of Activities for 2014, in good form.
b. Present API’s Statement of Financial Position at December 31, 2014, in good
form.
c. Present API’s Statement of Cash Flows for 2014, in good form, using the direct
approach for the operating section. Include a reconciliation of change in net
assets to change in cash from operations.

ANS:
Journal entries (not required):

Cash 155,000
Restricted cash 20,000
Contributions-PR 20,000
Cash 10,000
Net assets released-time-
TR 10,000
Net assets released-time-UR 10,000
Investments 14,000
Gains-UR 12,000
Gains-PR 2,000
Investments 20,000
Restricted cash 20,000
Cash 14,000
Investment income-TR 5,000
Investment income-UR 9,000
Plant & equipment 15,000
Cash 15,000
Fund raising expenses 5,000
Management & general
expenses 25,000
Plant & equipment 4,000
Cash 177,000
Net assets released-use-
TR 60,000
Net assets released-use-UR 60,000
Management & general
expenses 4,000

Accounting Professionals International
Statement of Activities for 2014
Unrestricted restricted net restricted net
net assets assets assets
Revenues, other support,
unrealized losses:
Cash contributions $120,000 $35,000 $20,000
Service contributions 4,000
Investment income 9,000 5,000
Unrealized gains (losses) 12,000 2,000
Promises of contributions 1,600

from use restrictions 60,000 (60,000)
Expenses:
Programs (150,000)
Fund raising (5,000)
Management and general (29,000)
______ ______ ______

Change in net assets 31,000 (28,400) 22,000
Beginning net assets 180,000 100,000 85,000
Ending net assets $211,000 $ 71,600 $107,000

December 31, 2014
ASSETS LIABILITIES
Contributions receivable 31,600 NET ASSETS
Property and equipment, net 171,000 Unrestricted 211,000
Investments 134,000 Temporarily restricted 71,600
Permanently restricted 107,000

_______ _______
Total $403,600 Total $403,600

Statement of Cash Flows for 2014
Contributions (155,000 + 10,000) $165,000
Expenses (177,000)

Investments (20,000)
Plant & equipment (15,000)
Cash for investing activities (35,000)

Endowments 20,000


Reconciliation
Change in net assets $ 24,600
Less endowments (20,000)
Plus decrease in contributions receivable (-1,600 + 10,000) 8,400
Less unrealized gains on investments (2,000 + 5,000 + 7,000) (14,000)
Less decrease in accounts payable (1,000)
Plus depreciation expense 4,000

Intermediate Accounting
and Reporting for
Colleges and Universities
Cash Flow
For FASB Institutions
1
Cash Flow…Goals of This Session
• Explain at a high level the purpose of the

statement
• Define the three basic sections of the statement
• Run through a statement so you can see how easy

it is to prepare – ya right!
Statement of Cash Flows
• Must articulate with balance sheet and statement

of activities
• Have two options for display
– Direct
– Indirect
• Rules governed by ASC 230 Statement of Cash
Flows and ASC 958-205 Presentation of Financial
Statements
2
Cash Flow – Direct Method
• Shows cash inflows by major source (tuition, research
activities, gifts, etc.)
• Cash outflows by natural object (salaries, payments to

vendors, interest expense, etc.)
• Reconciliation of net income to net cash from operations

(indirect method) is also required as a separate schedule if
direct method is used
• Tough to do, and not required by FASB – so why do it?
Cash Flow Statement – Indirect Method
• Method used by most FASB institutions

• Easy to prepare using the following basic formula…
+ Cash flows from operating activities

+ Cash flows from investing activities
+ Cash flow from financing activities
= Net increase (decrease) in cash
+ Cash at beginning of year
= Cash at the end of the year
3
Cash Flow from Operating Activities
This section of the cash flow statement…
• Starts with the change in net assets from the
statement of activities
• Makes adjustments to the change in net assets to
convert to the cash basis such as:
– Adding back depreciation
– Subtracting investment gains or adding back
losses
– Adding back write-offs on Student notes
receivable
Cash Flow from Operating Activities

• Reclassifies from the changes in net assets items
that are more appropriately shown in the investing
and financings sections of the statement…such as:
– Gifts for endowment
– Gifts for capital construction
• Shows changes in certain balance sheet categories

and the impact such changes have on cash. For
example:
– An increase in A/R uses cash
– An increase in A/P provides cash
4
ASU 2012-05
• Classification of the Sale of Donated
Securities in the Statement of Cash Flows
– Effective for years beginning after 6-15-13
– Requires classification of cash receipts from the
sale of financial assets that upon receipt are
directed for sale, and which were converted
nearly immediately to cash, as Operating
Activities (Financing Activities if $ restricted to
long term purpose)
– Current practice generally classifies as Investing
Cash Flows from Investing Activities

This section of the cash flow statement includes:
• Purchases and sales of investments
• Student loan collections and disbursements
• Acquisition and sale of plant assets
By FASB law, above activity must be shown gross
10
5
Cash Flows from Financing Activities
This section of the cash flow statement includes:
• Proceeds from the issuance of notes and bonds
• Payments on notes and bonds
• Other non-operating changes in net assets reported

in TRNA and PRNA such as gifts for endowment
and capital construction
11
Preparing an Indirect Method Cash Flow Statement
1. Start with a two year comparative balance sheet

2. Gather additional information
– Gross investment purchases and sales
– Gross student loan activity
– Changes in notes and bonds payable
– Changes in fixed assets
3. Categorize the above into the three cash flow
categories…operating, investing, and financing
12
6
Helpful Hints
• Have a really great spreadsheet with formulas
from the balance sheet and income statement
• Create an “audit trail” to see where the
numbers came from last year
• Watch out for rounding to mess up the “cross
footing” to statements
13
Let’s look at a real statement

• Please refer to USF’s statement of cash flows
provided in your materials.
14
7
8
GENERAL PRINCIPLES ON ACCOUNTING FOR NPES
1. Which of the following is not a condition to be satisfied for nonrecognition of contributed collection items?
None of these
2. Income earned from permanent endowments that can be spent only on certain programs but has not yet
been spent would be recorded in the statement of activities as
3. Which of the following is not a required external financial statement of an NPE?

Management Discussion and Analysis
4. When are conditional promises to give cash recognized in the financial statements?
When the promise becomes unconditional in status
5. The fair value of contributions cannot be determined by using

None of the above
6. Which of the following contributions are recognized in the statement of activities?

Contributions of services that enhance nonfinancial assets
7. Which of the following contributed services are not recognized in the financial statements?
Contributed services performed by persons not having specialized skills
8. Which statement is not correct?

Depreciation expense is not recognized by an NPE
operations
The total permanently net assets is: 11200000
indicate DECREASE.

The net effect of the transactions in K2’s 20x1 unrestricted net assets is: 0
answer.
The net effect of the transactions in the year-end unrestricted net assets (ignore depreciation) is: 12240000
12. In the absence of donor’s stipulations, gains recognized on an endowment would be reported in the
statement of financial activities as increases in
13. Which of the following categories of net assets is not required to be shown in the statement of financial
position?
Board-restricted
14. A local citizen gives a not-for-profit entity a cash donation that is restricted for research activities. The
money shall be returned to the donor if the NPE fails to meet the condition. The money should be recorded as
Deferred revenue
15. Reciprocal transfers where both parties give and receive something of value are
Exchange transactions
answer.
The permanently restricted contributions revenue is: 2000000

17. Which of the following is not a required characteristic of a private not-for-profit organizations per the
definition given by GAAP
An organization dedicated to service for the public good
operations
The total unrestricted net assets is: 6400000
answer.
The temporarily restricted contributions revenue is: 8000000
20. Investments are reported by NPEs at

Fair value
answer.
The net effect of the transactions in the year-end permanently restricted net assets is: 2000000

How much should be shown as increases in Temporarily Restricted Net Assets in Year 1?
P7,000.00
23. Donor-restricted contributions are recognized in the financial statements when

Received

How much should be reclassified on the Statement of Activities in Year 2 from the Temporarily
Restricted Net Assets to the Unrestricted column?
P7,000.00
Net assets released from restrictions in Fighting’s 20x2 statement of activities is: 1000000
26. When are unconditional promises to give recognized as revenue?

In the period the promise is received
answer.
The “net assets released from restrictions” in 20x1 is: 8000000
28. A contribution is a(an)

Unconditional transfer of cash
29. Unconditional promise to give that include promises of payments due in future periods are reported as
Restricted revenues
30. A nonprofit organization’s restricted fund typically is established in rationale to

Provisions of a contribution to the organization
31. On the financial statement of an NPE, “fund balance” is replaced by

Net assets
answer.
The unrestricted contributions revenue is: 4000000
33. Alice makes a cash gift which has no strings attached to a political party. It is recorded as
Revenue-unrestricted contribution
34. Which of the following donated services would not be recognized as contributions in the statement of
activities?
Services contributed by lay volunteers manning a phone bank
35. Contributions are reported in the statement of activities using all of the following categories except
Board-restricted
36. Which of the following contributions are not recognized in the statement of activities?
None of these
37. Income earned from temporary endowments that can be spent only on certain programs but has not yet
been spent would be reported in the statement of activities as
Revlove Organization, an NPE, received the following during 20x1:
a. Land with fair value of P40,000,000 to be sold to acquire a bus

b. Shares of stocks with fair value of P12,000,000 to be retained indefinitely. The dividends from the
As a result of these donations, Revlove should report an increase in temporarily restricted net assets in the
amount of: 40000000
39. One characteristic of NPEs that is comparable with that of government entities is
Stewardship of resources
operations
The total temporarily restricted net assets is: 20280000
41. How would the expiration of a prior-year donor restriction as to purpose be reflected in the current year’s
A separate line item reclassification between the temporarily restricted and unrestricted categories
42. Which of the following contributions are credited to a Deferred Revenue account until spending occurs?
None of these
Total revenue recognized on the contributions in 20x1 is: 1400000
44. How would spending of money donated in the prior year for spending in the current year be reported in the
As an expense in the unrestricted category
indicate DECREASE.

The net effect of the transactions in K2’s 20x1 temporarily restricted net assets is: 120000
answer.
The net effect of the transactions in the year-end temporarily restricted net assets (ignore depreciation) is: 0
47. Unconditional transfers of cash or other resources to an NPE in a voluntary nonreciprocal transaction is the
definition of
Contributions
48. A gift in kind for which there is little or no discretion on disposition should be accounted for by an NPE as
49. Which of the following contributions are credited directly to the entity’s net assets when received?
None of these

Depends only on the passage of time (ITO ANG SAGOT KAPAG WALA SA CHIOCES YUNG NASA #51)

Depends only on the passage of time or depends on the demand by the university to be paid
ACCOUNTING FOR NPES - HOSPITALS

1. The governing board of Simplicity Hospital, which is operated by a religious organization, designated
P500,000 of cash for future expansion of the hospital. On the hospital's statement of financial position, the
cash designated for future plant expansion would be disclosed in which of the following classes of net assets?
2. Faith Hospital, an NPE, rendered P2,400,000 in services to patients, P2,000,000 of which is charged to
PhilHealth. It is estimated that only P2,120,000 will be collected. Of the P280,000 difference, P140,000 is the
estimated contractual agreements with PhilHealth, P20,000 is allowance for discounts to hospital employees,
P80,000 is charity care, and P40,000 is the uncollectible accounts. The net patient revenue is:
2160000
3. The following accounts are taken from ledger balances of Caring & Loving Hospital, an NPE:
Gross patient service revenue, P11,049,200
Research grant revenue to the extent expended, P361,000
Revenues from sale of cafeteria meals to guest and employees, P108,000
Donated services of nurses and physicians (otherwise purchase), P145,000
Unrestricted gifts and grants, P100,200
Unrestricted endowment income, P12,000
Gifts restricted for equipment purchase, P540,000
Donor-restricted investments for permanent endowment, P150,000
Temporarily restricted endowment income, P25,000
Revenues from parking lot, P31,000
Revenues from vending machine, P68,000
Income on investment whose use is limited by the board for capital improvements, P207,000
Contributions restricted by donor for pediatric unit operations, P225,000
Courtesy allowances/staff discounts, P215,000
Provision for uncollectibles, P341,600
 The net patient revenue is: 9505700

 The total operating revenue-unrestricted is: 10218700
 The total operating revenue unrestricted & restricted is: 10443700
4. An NPE hospital received a donation of medicine from the Good Pharmaceutical Co. on March 15, 2020.
The cost of the medicine to the company was P66,000, and its market value was P110,000. Twenty percent of
the medicine was used by the hospital during the year ended December 31, 2020. On the hospital's statement
of operations for the year ended December 31, 2020, the contribution of medicine would increase operating
revenues by
110000
5. In 2020, World Hospital, received an unrestricted bequest of ordinary shares with a fair value of P50,000.
The testator paid P20,000 for the shares. World should record the bequest to
Increase unrestricted net assets by P50,000
6. Perseverance Hospital, an NPE, signed an agreement with Patience, Inc. to provide medical services to
each of Patience’s 100 employees for P2,000 per month, per employee. During the month of April 2020, only
20 employees availed of the medical services. The premium revenue recognized in April 2020 is:
200000
7. Resilience Hospital, an NPE, had the following transactions during the period:
b. Received P80,000 dividends from donated shares whose use is unrestricted.
c. A computer consultant provided free services on the upgrading of Resilience’s information system
which would have been purchase if not donated for P200,000
d. Purchased medicines from Unilove Pharma but was not charged because it was deemed donated to
Resilience.
In Resilience’’s statement of operations, total other revenues is recorded at:
800000
8. An NPE hospital has the following account balances
Revenue from newsstand, P50,000
Amounts charged to patients, P800,000
Salary expense-nurses, P100,000
Contractual adjustments, P110,000
Bad debts, P10,000
The hospital’s net patient service revenue is: 690000
9.Care Hospital, an NPE, had the following receipts during the year.
Net patient revenues, P1,000,000
Premium revenue, P200,000
Sales from canteen, P300,000
Investment income, P50,000
Contributions to be used in renovating the hospital, P400,000
The reported total revenues in the revenues section of the statement of operations is: 1550000
10. Under Clever Hospital’s established structure, it would have earned patient service revenue of P9,000,000
for the year ended December 31, 2020. However, P6,750,000 was collected because of charity allowances of
P1,500,000 and discounts of P750,000 to third party payors. The amount that Clever should record as net
patient revenue for the year ended December 31, 2020 is:
6750000
11. An NPE hospital receive the following restricted contributions and other receipts during the year ended
December 31, 2020.
a. for research, P300,000
b. for equipment acquisition, P200,000
c. Income from endowment to be used for new addition to hospital plant, P1,000,000
None of the contributions or other receipts were expended during the year ended December 31, 2020.
 For the year ended December 31, 2020, the amount that would be reported on the hospital’s
statement of changes in net assets as an increase in temporarily restricted net assets is: 1500000
 Assuming the P200,000 was expended to purchase a state-of-the-art x-ray machine, for the year
ended December 31, 2020, the amount that would reported on the hospital’s statement of changes
in net assets as an increase in temporarily restricted net assets is: 1300000
12. Brave Hospital, an NPE had the following receipts during the year:
Billings to patients, P4,800,000
Sales from canteen, P1,000,000
Billings on capitation agreements, P240,000
Uncollectible accounts, P400,000
Salaries of doctors, P1,400,000
The net patient revenue is: 3600000
13. Under Diligent Hospital’s established rate structure, the hospital would have earned patient service
revenue of P5,000,000 for the year ended December 31, 2020. However, Diligent did not expect to collect this
amount because of contractual adjustments of P500,000 to third payors. In May 2020, Diligent purchased
medical supplies from Happy Pharmacy at a cost of P1,000. However, Happy considered the P1,000 as
donation to Diligent. On December 31, 2020, Diligent has board-designated assets of P40,000 cash and
P700,000 investments.
 Diligent should report net patience revenue for the year ended December 31, 2020 in the amount
of: 4500000
 Diligent should report board-designated assets in unrestricted assets in the amount of: 740000
14. Justice Hospital, an NPE, has the following plant and equipment (net of depreciation):
a. Land, P500,000
b. Building, P10,000,000
c. Movable equipment, P2,000,000
Justice should report restricted assets at an amount of: 0

15. Under Savior Hospital’s established rate structure, the hospital would have earned patient service revenue
of P7,000,000 for the year ended December 31, 2020. However, it did not expect to collect this amount
because of charity allowances of P1,000,000 and discounts of P500,000 to third party payors. In May 2020,
Savior purchased bandages from Mercury Drug at a cost of P5,000. However, Mercury notified savior that the
invoice was being cancelled and that the bandages were donated to Savior. The patient service revenue that
Savior will record for the year ended December 31, 2020 is:
6000000
16. Hope Hospital, an NPE, had the following transactions during the period:
b. Received P20,000 dividends from donated shares. The use of dividends is unrestricted.
c. A computer consultant upgraded Hope’s information system for free. Hope would have paid P50,000
for those services if they had not been donated.
d. Received donations of medicines worth P10,000 from a pharmaceutical company.
The total other revenues to be presented in Hope’s statement of operations for the period is: 200000
17. The following information relate to Courage Hospital, an NPE. Answer the questions that follow.
 The net patience revenue is: 289000

 The total operating revenue is: 344000
 The total operating expenses is: 330000
 The income from operations is: 14000
 The total non-operating income-unrestricted is: 57000
 The change in net assets-unrestricted is: 71000
 The net assets-unrestricted, ending is: 109000
 The net assets-temporarily restricted, ending is: 38000
 The total assets is: 450000
 The total net assets is: 397000
ACCOUNTING FOR NPES - COLLEGES AND UNIVERSITIES
1. Where should an alumnus contribution of P50,000 to pay for scholarships for international study be
accounted for?
Current restricted fund
2. Which of the following is not an example of general and educational expenses recorded by a college or
university?
Purchase of sweatshirts for sale in the college bookstore
3. A collection of first editions is donated to Southern Luzon State University for its library. Which is the correct
credit?
No entry is required
At June 30, 2020, the school’s unrestricted net assets balance was
P3,000,000
For the year ended June 30, 2020, what amount should be included in the school’s revenue for the
unrestricted gifts and restricted grants?
P880,000
6. Endowment income was restricted to student aid activities. Cash is paid for all activities. Which is the credit
necessary for classification?
Reclassification in-temporarily restricted, satisfaction of program restrictions
7. What is the basis of accounting used in accounting for NPE college or university?
Accrual basis
expected to be realized because scholarships totaling P150,000 had been granted to students for which
attending Ateneo. How much should Ateneo report for the summer session ended 2020 as net revenue
from tuition and fees?
P1,650,000
9. Unrestricted current funds of Malayan University designated by the governing board for a specific future
purpose should be reported as part of
10. An alumni donates P10,000 to University of the Philippines for a new Women’s Studies program. The
alumni wants the principal to remain intact but the investment earnings can be used to support the Women’s
Studies program. This donation would be accounted for in the:
Endowment fund
11. The Divine Word College issues long-term debt to build a bridge over the gap between two main
campuses. The debt would be accounted for in the
Investment in plant
12. An NPE college received an offer from an engineer, an alumnus, to teach Engineering Math for one
semester at no cost. This contribution of service
Should be recorded as a revenue with an equivalent amount recorded as an expenditure
attending Ateneo. What amount should Ateneo include as net revenues from student tuition and fees?
P1,500,000
15. Unexpended plant fund accounts for:
Assets allotted for future plant acquisition
16. A university’s long-term boards issued to build dormitories would be recorded in the
Investment in plant fund
17. The quasi-endowment fund of St. Augustine University would account funds set aside by
The governing board of the university for future purpose

On December 31, 2020, the total liabilities amounted to:
P1,130,000
19. A life income fund is used when
All income earned on donated assets are to be paid to the donor for his/her lifetime
On December 31, 2020, the total assets amounted to:
P5,365,000
scholarships with services rendered to the university totaling P220,000 were granted to students. What
amount should DLSU-D include in net revenue from student tuition and fees for the first semester
ended 2020?
P3,920,000
22. Which plant fund subgroup would consider the following transaction. A bond principal payment is made on
a bond that was issued with the proceeds being designated for construction of a new gymnasium?
Plant fund for retirement of indebtedness
attending Ateneo. The increase in unrestricted net assets for the summer session ended 2020 amounted
to
P1,500,000
24. Private grants which are essentially pass through financial aid to students are accounted for as
Agency transactions
25. For San Sebastian College-Recoletos, the receipt for operating activities that have external restrictions as
to the purpose for which they can be used is recorded by crediting:
Contribution Revenue
26. The loan fund of Pangasinan State University would account for loans
To university students
27. Which of the following is not an example of general and educational revenues of an NPE college or
university?
Room and board fees received by the dormitory
28. In an NPE university, government grants given directly to students are an example of
scholarships with services rendered to the university totaling P220,000 were granted to students. What amount
should DLSU-D include in educational and general current funds or gross revenues (net of refunds) from
student tuition and fees?
P4,000,000
30. Cebu Central University budget funds for the maintenance and repair of its building. These funds would be
accounted for under
Plant fund for renewals and replacements
31. The Board of Trustees decides to set aside P5,000,000 to consider purchasing additional land on the first
month of the next fiscal year. What type of transfer is this?
Discretionary
32. CALEB decides to contribute P1,000,000 to his alma mater. Southwestern Samar College agrees to pay
CALEB a fixed amount every month for the next 20 years in exchange for the donation. CALEB’s donation
Annuity fund
33. Which of the following is not correct?
Expenses denote outlay of resources
34. Which of the following is not an example of the major categories of funds for an NPE college or university?
Proprietary funds
35. Which of the following receipts should be recorded in the restricted current fund of an NPE university?
A cash donation to provide scholarships
36. Which of the following funds of an NPE university makes periodic payments of a fixed amount at equal
intervals
Annuity fund
37. In accounting for loan funds, revenue is recorded when the
Contribution is received
38. The type of endowment fund for which the principal may be expended after the occurrence of an event
specified by the donor is a/an
None of these
39. Which university fund is most similar to the governmental general fund?
Current-unrestricted
40. In a university, class cancellation refunds of tuition and fees should be recorded as
I. Reduction of revenue from tuition and fees.
II. Reduction of accounts receivable
I only
41. The following funds were among those on Holy Spirit University’s books at December 31, 2020:
 Funds to be used for acquisition of additional property for university purposes (unexpended at
12/31/2020) – P3,000,000
 Funds set aside for debt service charges and for the retirement of indebtedness on university’s property
– P7,000,000
P10,000,000
42. All of the following are plant funds in colleges and universities except:
Plant replacement and expansion fund
43. An alumnus made a donation of an adjoining land to a university. The university would record the gift as
An unrestricted revenue
44. Admissions, counseling, and registration are considered to be:
Student services
For the year ended June 30, 2020, what amount should the school record as contribution revenue from the
volunteers’ services?
P200,000
46. Which of the following is an example of an inter-fund transaction?
Cash is set aside for payment of a mortgage
What amount of total revenue from the above-mentioned transactions would be recognized as
revenues?
P970,000
48. Any restrictions on gifts, grants, or bequests received by NPE university are imposed by
Donors
50. Which of the following is a mandatory transfer by Ateneo de Naga University?
Principal and interest payments on long-term debt
DRILL 1 - NPE
1. A(n) conditional promise to give is not a contribution
2. Term endowments would be classified as temporarily restricted contributions.
3. Contributed services are recognized if they create or enhance nonfinancial assets or require
specialized skills.
4. Contributions of monetary and nonmonetary assets are valued at their fair value.
5. The statement of cash flows may be prepared using the direct method (the preferred method) or the
indirect method.
6. Contributions that create endowments are permanently restricted contributions.
7. A promise to give is a contribution if the promise is unconditional.
8. Promises with future payment dates would usually be classified as temporarily restricted
contributions.
9. Contributed works of art, historical treasures, and similar assets are called collection items.
10. The three categories which contributions are to be reported are unrestricted, temporarily restricted,
and permanently restricted.
11. Contributions are unconditional transfers of cash or other assets.
12. In general, contributions are recognized when received.
13. The statement of activities may be in columnar format or in layered format.
14. All expenses are shown in the unrestricted category in the statement of activities.
15. In general, revenues and expenses are reported at their gross amounts.
16. A transfer in which value is not received or given in exchange is a(n) nonreciprocal transfer.
17. Private NPOs must issue financial statements that focus on the NPO as a whole.
DRILL 2 – NPE
1. Repairs made to a building on a volunteer basis by a plumber would not be recognized in the financial
statements
FALSE
2. Revenues from special events that are ongoing and major activities are reported net of related
expenses
FALSE
3. The statement of financial position must show total amounts for each classification of net assets.
TRUE
4. Gifts in kind do not qualify as recognizable contributions
FALSE
assets
TRUE
6. An unconditional promise to give must be in writing to qualify as a recognizable contribution.
FALSE
TRUE
8. Fund accounting for internal record-keeping is specifically discouraged.
FALSE
temporarily restricted.
FALSE
10. Net assets with board-imposed restrictions are classified as temporarily restricted until conditions are
met.
FALSE
11. Board-restricted net assets must be shown separately in the statement of financial position
FALSE
FALSE
TRUE
14. Contributed services are recognized only if they create or enhance nonfinancial assets
FALSE
15. Income earned on endowments (other than term endowment) is reported as increasing permanently
restricted assets
FALSE
TRUE
TRUE
TRUE
net assets
TRUE
20. Collections items need not be capitalized under certain circumstances.
TRUE
21. Expiration of restrictions must be reported separately in the statement of activities
TRUE
22. Contributions received are measured at fair value.
TRUE
TRUE
FALSE
25. Unconditional promises to give are recognized in the financial statements when received not when
collected.
TRUE
assets
FALSE
27. The definition of contributions does not include conditional promises to give
TRUE
28. Exchange transactions are the main source of revenues for most NPEs
FALSE
29. A communication that is unclear as to whether it constitutes an unconditional promise to give is deemed
an unconditional promise if it is legally enforceable
FALSE
30. The definition of contributions includes both reciprocal and nonreciprocal transfers.
FALSE
DRILL 2: NPE HOSPITAL

care, and P10,000 for uncollectible accounts. The entry to record the bill of P600,000 includes a
2. An NPE hospital agreed to provide medical services to A Co’s 100 employees for P500 per month, per
employee. In April 20x1, only 20 employees availed of the medical services. The entry to record revenue on
April 30, 20xx1 includes a
o Debit to cash, P10,000
o Credit to premium revenue, P50,000
o Debit to accounts receivable, P10,000
3. Hospital premium fees are:

o Only earned to the extent of the services provided
o Refundable to the subscriber if services are unused
o Revenues earned even if the standard change is above or below the fee
4. Danna makes a cash gift which has no strings attached to an NPE hospital. It is recorded as
o Non-operating revenue-unrestricted
o Other operating revenue-unrestricted
o A direct increase in net assets unrestricted
5. Donated medicines are classified as

o Premium revenues

o Statement of changes in owner’s equity
o Statement of cash flows
o Statement of operations
o Statement of financial position

o Friends and relatives who pay the medical costs of a patient
o Insurance companies and other groups that pay a significant portion of the medical fees
o Charities that supply medicines to hospitals and other health-care providers
o Doctors who reduce fees for indigent patients
8. A private NPE hospital received a cash contribution of P100,000 from Samantha Hicks on Nov. 14 20x8. Ms.
Hicks specified the money be used to acquire equipment. On Dec 31, 20x8, the hospital had not expended any
of Ms. Hicks’ contribution. On the statement of changes in net assets for the year ended, Dec 31, 20x8, the
hospital should report the contribution as P100,000 increase in
o Deferred revenue
o Fund balance
o Net assets with donor restrictions
o Net assets without donor restrictions
9. This refers to free services rendered to patients

o Subsidy to indigents
o Charity care
o Premium expense
10. A private NPE hospital charged a patient P8,600 for services. It actually billed this amount to the patient’s
third-party payor. The third-party payor submitted a check for P7,900 with a note stating that “the reasonable
amount is paid in full per contract.” Which of the following statements is true?
o The third-party payor retained the P700 and will convey it to the NPE hospital at the start of the next
fiscal period.
o The NPE hospital recorded the P700 as a contractual adjustment that it will not collect
o The NPE hospital will bill the third-party payor again for the remaining P700
o The patient is responsible to pay the remaining P700
11. A donor-restricted fund of an NPE hospital which may be specific-purpose fund, a term endowment fund, or
a plant replacement and expansion fund
o Permanently restricted fund
o General fund
o Temporarily restricted fund
o Particular fund

o Miscellaneous revenue
o Incidental revenue
o Unrestricted
14. What is the appropriate account to debit when reducing patient billings caused by arrangements with third-
party payors?
o Allowance for uncollectible and reduced accounts
o Patient service revenues
o Accounts receivable third-party payors
o Accounts receivable-patients
15. An NPE hospital agreed to provide medical services to A Co.’s 100 employees for P500 per month, per
employee. In April 20x1, only 20 employees availed of the medical services. This illustrates
o Third-party payor agreement
o Marketing strategy
o Private partnership
o Capitation agreement
recorded as
o unrestricted
17. Other Operating Revenues include

o Revenue from radiology services
o Revenues from nursing services for post-operative care
o Revenues from outpatient surgery
o Revenue from educational programs

o Revenue deductions
o Expenses
o Revenue earned if the standard charge is above or below the allowance
care, and P10,000 for uncollectible accounts. How much is the net patient service revenue?
o P545,000
o P540,000
o P565,000
o P600,000
o P560,000
o P575,000
care, and P10,000 for uncollectible accounts. The entry to record the contractual adjustments includes a
o Debit to third-party payor expense, P35,000
o Debit to net patient service revenue, P35,000
o Debit to agreements expense, P35,000
o Debit to contractual adjustments, P35,000
LONG PROBLEM – DAYAG COLLEGE
The preclosing trial balance of Dayag College of Business and the Arts shows the following balances:
1. In the statement of activities, unrestricted column, net assets at the end of the year is 395000 (please do not
2. In the statement of activities, temporarily restricted column, total revenues and gains excluding other support
3. In the statement of activities, unrestricted column, decrease in net assets is 280000 (please do not use peso
4. In the statement of activities, total unrestricted, temporarily restricted, and permanently restricted revenues
and gains excluding other support is 4055000 (please do not use peso sign, comma, or decimal)
5. In the statement of activities, total expenses (expenditures) and losses (other deduction) is 3970000 (please
do not use peso sign, comma, or decimal)
6. In the statement of activities, permanently restricted column, net assets at the end of the year is 3000000
7. In the statement of activities, temporarily restricted column, decrease in net assets is 135000 (please do not
8. In the statement of activities, net assets (restricted and unrestricted) at the end of the year is 4235000
9. In the statement of activities, unrestricted column, total revenues and gains excluding other support is
10. In the statement of activities, unrestricted column, total revenues and gains and other other support is
11. In the statement of activities, permanently restricted column, total revenues and gains excluding other
support is 500000 (please do not use peso sign, comma, or decimal)
12. In the statement of activities, temporarily restricted column, net assets at the end of the year is 840000
13. In the statement of activities, permanently restricted column, increase in net assets is 500000 (please do
not use peso sign, comma, or decimal)
14. In the statement of activities, total net assets released from restrictions is 375000 (please do not use peso
15. In the statement of activities, total (unrestricted and restricted) revenues and gains excluding other support
NEW QUESTIONS
On December 31, 20x1, ABC Organization, a not-for-profit entity, received the following donations:
 Ms. Alpha made a pledge (promise) to give P12,000 to ABC Organization each year for the next five
years starting on December 31, 20x2. The appropriate discount rate is 10%. The pledge is
unconditional.
 Ms. Beta made a pledge (promise) to provide half of the needed funds to construct a new building for
ABC Organization if ABC could get the remaining half of the funds needed from other donors by March
1, 20x2. As of December 31, 20x1, ABC has already accumulated 47% of the needed construction
funds from donations and ABC’s Board of Trustees strongly believes that the remaining 3% will be
received by the end of January 20x2. The estimated total costs of construction is P1,000,000.
 Mr. Charlie made a pledge (promise) to give ABC Organization a used offset printing equipment if ABC
acquires a paper cutting equipment. The offset printing equipment has a fair value of P1,200,000.
Because of recent cash flow problems, ABC’s Board of Trustees believes that it will not be able to
acquire a paper cutting equipment in the near term.
 Mr. Delta gave ABC Organization P500,000 as a challenge grant. ABC Organization can keep the
P500,000 if it can raise an additional P500,000 by the end of March 20x2. If ABC Organization fails to
comply with the condition, it shall return the amount received to Mr. Delta.
1. The entry to record the promise of Ms. Alpha includes a credit to
2. The entry to record the promise of Mr. Charlie includes a credit to

Contributions revenue – unrestricted support
None of these
3. The entry to record the promise of Mr. Delta includes a credit to
4. The entry to record the promise of Ms. Beta includes a credit to

-----------------------
True
-----------------------
ABC Hospital, an NPE health care provider, bills P600,000 for services rendered to patients, P500,000
of which is charged to Philhealth. It is estimated that only P530,000 will be collected. Of the P70,000
difference, P35,000 represent contractual adjustments with Philhealth, P5,000 for employee discounts,
P20,000 for charity care, and P10,000 for uncollectible accounts.
6. The entry to record the contractual adjustments includes a
Debit to Contractual Adjustments, P35,000
7. The entry to record the bill of P600,000 includes a

Credit to Patient Service Revenue, P600,000
-----------------------
temporarily restricted contributions.
False
An NPO disclosed the following in its 20x1 notes to financial statements:
operations. (permanently)
b. Net resources of P1,000,000 invested in plant assets. (unrestricted)
children’s playground. (temporarily)
d. Board-designated funds of P600,000. (unrestricted)
e. Received P20,000 cash from a donor who did not specify any use restrictions on the contribution
however, the donor specified that the donation should not be used until 20x2. (temporarily)
f. Received P800,000 (permanently) from a donor who stipulated that the contribution shall be invested
indefinitely and that the earnings shall be used for research purposes. Investment income in 20x1
amounted to P50,000. (temporarily)
9. The amount included in temporarily restricted net assets is:
5070000
10. The amount included in permanently restricted net assets is:
2800000
11. The amount included in unrestricted net assets is:
1600000
-----------------------
True
13. On the statement of operations of a health care organization, expenses are deducted from
Unrestricted revenues
14. On July 31, 2020, Valenzuela College, an NPE, showed the following amount to be used:
Renewal and replacement of college properties 200,000
Retirement of indebtedness on college properties 300,000
Purchase of physical properties for college purposes, but unexpended at July 31, 2020 400,000
The total amount that should be included in Valenzuela’s plant funds at July 31, 2020 is:
900000
15. A private NPE hospital received a cash contribution of P100,000 form Samantha Hicks on Nov. 14,
20x8. Ms. Hicks specified the money be used to acquire equipment. On Dec. 31, 20x8, the hospital had
not expended any of Ms. Hicks’ contribution. On the statement of changes in net assets for the year
ended, Dec. 31, 20x8, the hospital should report the contribution as a P100,000 increase in
Net assets with donor restrictions

Statement of Changes in Owner’s Equity
17. The financial statements of a not-for-profit entity should focus on the
Basic information on the organization as a whole
18. This refers to free services rendered to patients.
Charity care
19. ABC Organization, a not-for-profit entity, received the following donations during 20x1:
 Land with a fair value of P10,000,000 to be sold to acquire a bus.
As a result of the donations above, ABC should report as increase in temporarily restricted net assets
an amount equal to:
10000000
20. In 2020, Bautista Hospital, an NPE, received P250,000 pure endowment grant. Also in the same year,
Bautista’s governing board designated for special purposes, P300,000 which had originated form
unrestricted gifts.
The amount that should be accounted for as part of the unrestricted net asset class is:
300000
Insurance companies and other groups that pay a significant portion of the medical fees
Revlove Organizations, an NPE, receive the following donations during 20x1:
 Land with fair value of P40,000,000 to be sold to acquire a bus.

As a result of these donations, Revlove should report an increase in temporarily restricted net assets
in the amount of:
40000000
net assets.
True
False
25. Contributed services are recognized only if they create or enhance nonfinancial assets/
False
assets.
True
Revenue deductions

P110,000.
The contributions revenue recognized in 20x1 is 350000.
30. General purpose external financial reporting by a health care organization requires presentation of
Statement of operation
31. In June 2020, Gatdula Hospital, an NPE, purchased medicines from Camutin Pharmaceutical Co. at a
cost of P2,000. However, Camutin Pharmaceutical Co. notified Gatdula Hospital that the invoice was
being canceled, and the medicines were being donated to Gatdula. Gatdula should record this donation
of medicine as
Other operating revenue of P2,000
True
33. On December 1, 20x1, ABC Organization, a non-profit entity, had the following transactions:
 Purchased a vehicle costing P150,000 using unrestricted cash
 Received a vehicle with fair value of P120,000 from donation
ABC estimates that both of the vehicles have useful lives of 5 years and no residual value. ABC has an
accounting policy implying a time restriction on gifts of long-lived assets.
In ABC’s 20x1 statement of activities, the amount of depreciation expense that should be included
under changes in unrestricted net assets is 4500
34. Medina Hospital, an NPE, would have earned patient service revenue of P9,000,000 for the year
ended, December 31, 2020. However, only P6,750,000 was collected because of charity care services
of P1,5000,000 and discounts of P750,000 to third-party payors.
For the year ended December 31, 2020, Medina Hospital should record patient service revenues of
7500000.

Non-operating revenue
True
False
Unrestricted
P110,000.
The net assets released from restrictions reported in the 20x2 statement of activities is 100000.

True
41. On the statement of activities of a private university, expenses are reported by
Function
42. An unconditional promise to give must be in writing to qualify as a recognizable contributions.
False
True
44. A private NPE hospital charged a patient P8,600 for services. It actually billed this amount to the
patient's third-party payor. The third-party payor submitted a check for P7,900 with a note stating that
"the reasonable amount is paid in full per contract." Which of the following statements is true?
The NPE hospital recorded the P700 as a contractual adjustment that it will not collect.
45. The following funds were among those held by Calahati College, an NPE, at December 31, 2020:
Principal specified by the donor as nonexpendable P500,000
Principal expendable after the year 2025 300,000
Principal designated from current funds 100,000
The amount that Calahati College should classify as regular endowment fund is 500000.
46. ABC Organization, a non-profit entity, acquired shares of stocks to be held as investment for P200,000
using unrestricted net assets. During the year, ABC received cash dividends of P10,000. At year-end,
the shares have a fair value of P220,000.
The effect of the transactions described above on the year-end statement of activities of ABC amount
to 30000.
47. Which of the following statements related to pledges is incorrect?
Pledges are generally enforceable contracts
48. The definition of contributions does not include conditional promises to give.
True
50. The machine of ABC Organization, a not-for-profit entity, has malfunctioned. Mang Tony, a professional
mechanic, repaired the machine for free. The fair value of the services is estimated at P10,000. Which
of the following statements is correct?
This event has a zero net effect on ABC’s net assets
recorded as
52. A non-profit organization receives donation of services in-kind from an accountant who was consulted
regarding the NPO’s financial reporting system. The NPO will most likely recognize those services as
Expenses and revenues
assets.
False
54. When the donor has specified a particular date or event after which the principal of the Endowment
fund may be expended, the Endowment Fund is referred to as a(an)
Term endowment fund
55. An NPE college’s unrestricted current fund comprised the following.
Asset 5,000,000
Liabilities (including deferred revenues of P100,000) 3,000,000
The fund balance of the NPE college’s unrestricted fund is 2000000
56. Board-designated funds should be accounted for as
Unrestricted funds
57. The following expenditures were among those incurred by Barrientos university an NPE during 2020
Administrative data processing P50,000
Scholarship and fellowship P100,000
Operation and maintenance of physical plant P200,000
The amount to be included in the functional classification “institutional support” expenditures account
is 50000
58. Private not-for-profit organizations should report a statement of cash flows using the
Either direct or indirect method
59. Collection items need not be capitalized under certain circumstances.
True

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GENERAL PRINCIPLES ON ACCOUNTING FOR NPES

3. Which of the following is not a required external financial statement of an NPE?

5. The fair value of contributions cannot be determined by using

6. Which of the following contributions are recognized in the statement of activities?

8. Which statement is not correct?

K2, an NPE, had the following transactions during 20x1:

The permanently restricted contributions revenue is: 2000000

The temporarily restricted contributions revenue is: 8000000

20. Investments are reported by NPEs at

22. The following gifts are received in Year 1 by an NPE:

23. Donor-restricted contributions are recognized in the financial statements when

24. The following gifts are received in Year 1 by an NPE:

26. When are unconditional promises to give recognized as revenue?

The “net assets released from restrictions” in 20x1 is: 8000000

28. A contribution is a(an)

30. A nonprofit organization’s restricted fund typically is established in rationale to

31. On the financial statement of an NPE, “fund balance” is replaced by

The unrestricted contributions revenue is: 4000000

Revlove Organization, an NPE, received the following during 20x1:

a. Land with fair value of P40,000,000 to be sold to acquire a bus

Total revenue recognized on the contributions in 20x1 is: 1400000

K2, an NPE, had the following transactions during 20x1:

50. A pledge is unconditional if it

51. A pledge is unconditional if it

ACCOUNTING FOR NPES - HOSPITALS

Unrestricted net assets

Gross patient service revenue, P11,049,200

Research grant revenue to the extent expended, P361,000

Revenues from sale of cafeteria meals to guest and employees, P108,000

Donated services of nurses and physicians (otherwise purchase), P145,000

Unrestricted gifts and grants, P100,200

Unrestricted endowment income, P12,000

Gifts restricted for equipment purchase, P540,000

Donor-restricted investments for permanent endowment, P150,000

Temporarily restricted endowment income, P25,000

Revenues from parking lot, P31,000

Revenues from vending machine, P68,000

Contributions restricted by donor for pediatric unit operations, P225,000

Contractual adjustments, P1,328,500

Courtesy allowances/staff discounts, P215,000

Provision for uncollectibles, P341,600

 The net patient revenue is: 9505700

Increase unrestricted net assets by P50,000

a. Sales of P480,000 from gift shop and cafeteria

b. Received P80,000 dividends from donated shares whose use is unrestricted.

In Resilience’’s statement of operations, total other revenues is recorded at:

8. An NPE hospital has the following account balances

Revenue from newsstand, P50,000

Amounts charged to patients, P800,000

Interest income, P30,000

Salary expense-nurses, P100,000

Contractual adjustments, P110,000

Undesignated gifts, P80,000

Bad debts, P10,000

The hospital’s net patient service revenue is: 690000

Net patient revenues, P1,000,000

Premium revenue, P200,000

Sales from canteen, P300,000

Investment income, P50,000

Contributions to be used in renovating the hospital, P400,000

a. for research, P300,000

b. for equipment acquisition, P200,000