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MIDTERM EXAMINATION

1. According to P.D. No. 1445, government personnel entrusted with the custody of
government resources (choose the incorrect statement)
a. are responsible for the safekeeping therefor in accordance with the law.
b. are directly responsible to the head of the agency for the efficient and effective
utilization therefor.
c. are directly responsible to the public for the efficient and effective utilization therefor.
d. must be properly bonded.

2. The coverage of the GAM for NGAs includes all of the following, except:
a. basic concepts used in auditing the accounts and financial reports of government
entities.
b. basic concepts used in preparing general purpose financial statements in accordance
with the PPSAS.
c. basic concepts used in reporting of budgetary information.
d. basic concepts used in preparing other financial reports as may be required by laws.

3. It refers to the authority issued by an agency’s Central Office to its regional and operating
units to cover the latter’s cash requirements.
a. Notice of Cash Allocation
b. Notice of Transfer of Allocation
c. Non-Cash Availment Authority
d. Cash Disbursement Ceiling

4. Under responsibility accounting, non-controllable costs are

a. costs incurred indirectly and allocated to a responsibility level.
b. ignored when general purpose financial statements are prepared.
c. costs that are uncertain of timing and amount.
d. all of these

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

6. Which of the following best describes “Not yet due and demandable” obligations
a. Obligations that are not yet incurred but are expected to be incurred in the future
b. Obligations already incurred and recorded in the registries but not yet in the accounting
books because the accounting recognition criteria for liabilities are not yet met.
c. Obligations that are long-term and, hence, do not require payment within 12 months
from the reporting date.
d. Obligations where the obligee provided the entity with a grace period not to demand
immediate payment within 1 year or longer.

7. Recording in the Obligation Request and Status (ORS) is made when

a. obligations are incurred
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b. liabilities for the obligations are recognized in the books of accounts

c. the recognized liabilities are settled
d. all of these

8. Which of the following statements best describes the various Registries maintained by
government entities?
a. The Registries primarily serve as an internal control for controlling and monitoring the
conformance of actual results with the approved budget.
b. The Registries serve as ledgers to classify the effects of accountable events on the
financial statement elements. This allows the reconciliation of assets, liabilities, equity,
revenues and expenses in the general purpose financial statements of government
entities.
c. The Registries support the Journals and Ledgers in a way that they authenticate the
validity and legality of government transactions. This enhances the transparency in the
financial reporting of the government.
d. All of these.

9. Which of the following is an indication of impairment of investment property from internal

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

10. Entity A, a government entity, acquires investment in bonds for ₱100,000, equal to face
amount, and incurs transaction costs of ₱10,000. At year-end, the fair value of the
investment is ₱120,000. If the investment is classified under the held to maturity category,
which of the following carrying amounts at the end of Year 1 would most likely not be
questioned by the COA auditor?
a. 120,000
b. 108,382
c. 100,000
d. Answer cannot be determined due to insufficient data, like nominal interest rate,
effective interest rate, maturity, contractual terms, present value factor, amortization
table, name of auditor, etc.

 100,000 acquisition cost + 10,000 = 110,000 initial carrying amount.

 Since the investment is classified as held to maturity investment, it will be subsequently
measured at amortized cost. At the investment’s maturity date, the carrying amount of the
bonds would be equal to 100,000, the face amount.
 Thus, choice (a) is incorrect because 120,000 is the fair value; choice (c) is also incorrect
because 100,000 is the face amount. The correct carrying amount at the end of Year 1
would be less than 110,000, the initial carrying amount, but more than 100,000, the face
amount. Choice (b) is the best answer.
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11. If the unadjusted balance of cash per bank statement is less than the adjusted balance and
there no other reconciling items or errors, the difference is most likely caused by
a. Credit memo
b. Debit memo
c. Deposits in transit
d. Outstanding checks

12. The issuer of a financial instrument shall classify the instrument, or its component parts,
on initial recognition as a
a. financial asset
b. financial liability
c. equity instrument
d. any of these

13. According to the PPSAS, a financial asset is recognized when

a. an entity becomes a party to the contractual provisions of the instrument.
b. there is reasonable certainty that the asset will result to inflow of resources embodying
economic benefits to the entity.
c. its cost can be measured with sufficient reliability.
d. c and d

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

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

15. The receipt of subsidy from the national government or other government agencies
a. gives rise to the recognition of revenue
b. does not give rise to the recognition of revenue
c. gives rise to a liability but not revenue
d. b and c

16. These refer to fees paid for the use of the entity’s assets such as trademarks, patents,
software, and copyrights.
a. Lease expense
b. Royalties
c. Interest
d. Any of these

17. Entity A is a government hospital. Entity A would most likely recognize revenue from
services rendered to a patient
a. when the services are rendered and the patient is billed.
b. when the fee is collected.
c. on a straight line basis.
d. by reference to the stage of completion at the reporting date.

18. Which of the following items are classified by a government entity as Inventory Held for
Consumption?
a. Minor tools and equipment costing less than ₱15,000.
b. Raw materials that are consumed in the production process.
c. Office supplies and similar materials.
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d. Rice and other welfare goods held for distribution

19. Under this inventory system, purchases, sales, and other transactions affecting inventory
are recorded in the “inventory” and “cost of sales” accounts, as appropriate. Moreover, stock
cards and stock ledgers are maintained.
a. Specific identification
b. Periodic inventory system
c. Perpetual inventory system
d. Weighted average

20. This consolidates all issued Requisition and Issue Slips (RIS) for inventories and is used in
updating both the Stock Card and the Stock Ledger Card
a. Report of Supplies and Materials Issued (RSMI)
b. Report on Inventory Subsidiary Ledgers (RISL)
c. Report of Accountability for Accountable Forms
d. Report on the Physical Count of Inventories

21. The following are the account balances from Entity A’s statement of financial performance:

Inventory, January 1, ₱30,00

20x1 ................................... 0
Purchases .......................................................... 40,000
...
Purchase Returns and 5,000
Allowances .......................
Purchase 4,000
Discounts ..............................................
Freight- 5,000
In ..............................................................
Inventory, December 31, 15,000
20x1 .............................
Freight- 6,000
Out ...........................................................

Given this information, the cost of sales during 20x1 is:

a. 51,000
b. 46,000
c. 56,000
d. 66,000

A
Solution:
Inventory
beg. 30,000
Purchases 40,000 5,000 Purchase Ret. and Allow.
Freight-In 5,000 4,000 Purchase Disc.
51,00
0 COGS
15,000 end.

22. Relief and other welfare goods held for distribution are most likely to be classified by a
government entity as
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a. Semi-Expendable Property
b. Inventory Held for Consumption
c. Inventory Held for Distribution
d. None of these

23. Entity A, a government entity, records purchases of items of inventory under the
“Purchases” account and freight-in under the “Freight-in” account. Which of the following
statements is correct?
a. Entity A is not compliant with the requirements of GAM for NGAs.
b. Entity A is not compliant with the requirements of GAM for NGAs. This can be rectified
by note disclosure.
c. Entity A is compliant with the requirements of GAM for NGAs, but needs to make a note
disclosure of the accounting policy choice.
d. Entity A uses the periodic inventory system and this is okay. There are no other
requirements from Entity A.

24. A government entity’s biological asset has fair values less costs to sell of ₱100,000 and
₱120,000 at the beginning and end of the period, respectively. The year-end adjusting entry
will most likely include
a. a debit to unrealized gain of ₱20,000 to be recognized in profit or loss
b. a credit to unrealized gain of ₱20,000 to be recognized in profit or loss
c. a credit to unrealized gain of ₱20,000 to be recognized directly in equity
d. a credit to unrealized gain of ₱20,000 to be recognized in surplus or deficit

25. Entity A acquires a biological asset for ₱100, equal to fair value, and incurs transaction
cost of ₱10 on the purchase. The costs to sell at the acquisition date are ₱20. Which of the
following statements is correct?
a. Entity A recognizes the purchased asset at ₱100.
b. Entity A recognizes the purchased asset at ₱90.
c. Entity A recognizes a loss of ₱30 on the initial recognition of the purchased asset.
d. Entity A recognizes a gain of ₱20 on the initial recognition of the purchased asset.

26. Which of the following statements is correct regarding investment properties?

a. A building being rented out to the entity’s employees who are paying rentals at market
rates is not an investment property.
b. All assets classified as investment property shall be depreciated.
c. A commencement of owner-occupation is a change in use that triggers a transfer from
PPE to investment property classification.
d. A decision to sell an investment property is considered a change in use under the GAM
for NGAs.

27. Which of the following may qualify as investment property?

a. Machineries that are held for lease
b. Building leased from another entity under an operating lease and is leased out to
various tenants under sub-operating leases.
c. An agricultural land purchased for appreciation purposes
d. Equipment purchased with an indeterminate purpose

28. Which of the following may be capitalized as cost of property, plant and equipment?
a. Professional fees
b. Costs of opening a new facility
c. Costs of introducing a new product or service
d. Costs of conducting business in a new location or with a new class of customers
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e. Administration and other general overhead costs

29. The initial testing costs incurred on an item of property, plant and equipment are
a. capitalized.
b. not capitalized.
c. capitalized after deducting the disposal proceeds of samples generated during testing.
d. Any of these as an accounting policy choice.

30. Entity A exchanges an item of PPE with Entity B. Assuming the exchange lacks commercial
substance, how should Entity A measure the equipment received from the exchange?
a. at the carrying amount of the asset given up
b. at the fair value of the asset given up
c. at the fair value of the asset received
d. at the carrying amount of the asset given up, plus cash paid or minus cash received

31. Entity A receives a donation of scientific equipment from an international body. If no

condition is attached to the donation, how should entity A account for the donation?
a. Recognize it immediately as income measured at the equipment’s fair value at the
acquisition date.
b. Initially recognized it as a liability measured at the equipment’s fair value at the
acquisition date.
c. Recognize it as income when the expenses intended to be compensated by the donation
are incurred.
d. b and c.

32. Transactions and events are recognized in the accounting records and recognized in the
financial statements of the periods to which they relate.
a. Time value of money
b. Recognition
c. Accrual basis of accounting
d. Going concern

33. Entity A, a government entity, maintains a petty cash fund with an established amount of
₱40,000. During the period, Entity A disburses ₱10,000 for office supplies from the petty
cash fund. The entry to record the disbursement is
a. Office Supplies Expense 10,000
Petty Cash 10,000
b. Office Supplies 10,000
Petty Cash 10,000
c. Office Supplies 10,000
Cash-Treasury/Agency Deposit, Regular 10,000
d. Office Supplies Expense 10,000
Cash-Modified Disbursement System
(MDS), Regular 10,000
e. None of these.

34. Which of the following statements is correct?

a. The purchases account is used in a periodic inventory system but not in a perpetual
inventory system.
b. Government entities sometimes record the acquisition of inventories under the
purchases account.
c. The classification of inventories as held for distribution at no charge or at a minimal
charge is not uncommon to business entities.
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d. Raw materials and work-in-process inventories are applicable only for business entities.

35. Select the correct statement.

a. All investment properties held for capital appreciation will be classified as held for sale
in the long run.
b. Investment properties being redeveloped as investment properties on behalf of third
parties are investment properties.
c. Investment properties that are to be disposed of without further development are
treated as investment property until they are derecognized.
d. Entity A’s primary line of business is leasing. Entity A shall treat all assets used in
providing lease services as investment property.

36. Select the incorrect statement regarding impairments of investment properties.

a. Impairments of investment properties of government entities are recognized in surplus
or deficit.
b. Investment properties are subject to impairment.
c. Impairment losses on investment properties measured under the cost model are never
reversed.
d. Compensation from third parties for investment property that was impaired or lost shall
be recognized in surplus or deficit when the compensation becomes receivable and not
offset with the amount of loss.

37. Which of the following statements is incorrect regarding investment property?

a. An investment property generates, or has the ability to generate, separately identifiable
cash flows from the other assets of the entity.
b. Transfers to or from investment property shall be made when, and only when, there is a
change in use.
c. During the period, Entity A, a government entity, reclassifies a building that was
previously used as office space to investment property. On the date of transfer, the
building has a carrying amount of ₱1M and a fair value of ₱1.2M. Entity A will
recognize a gain on transfer of ₱.2M.
d. When a government entity applies the cost model to account for its investment property
subsequent to initial recognition, changes in fair values may affect the entity’s
assessment of the property’s impairment.

38. Which of the following is included in the initial cost of an item of PPE?
a. Cash discounts taken
b. Cash discounts not taken
c. Nonrefundable purchase taxes
d. Refundable purchase taxes

Use the following information for the next two questions:

Entity A exchanged equipment with Entity B. Pertinent data are shown below:
Entity A Entity B
Carrying amount 85,000 130,000
Fair value 95,000 Indeterminable
Cash paid by Entity B to Entity A 15,000

39. If the exchange has commercial substance, how much is the initial measurement of the
equipment received by Entity B?
a. 95,000
b. 115,000
c. 100,000
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d. 110,000

95,000 FV of asset received

40. If the exchange has commercial substance, how much is the gain (loss) recognized by Entity
B in the exchange?
a. (50,000)
b. (35,000)
c. (15,000)
d. 0

Equipment – new 95,000

Loss (squeeze) 50,000
Cash 15,000
Equipment – old 130,000

41. A government entity records a transaction by debiting an account with a Revised Chart of
Account (RCA) Code that starts with “1” and crediting an account with an RCA Code that
starts with “4.” This transaction is most likely a
a. remittance of collection to the National Treasury.
b. payment of accounts payable.
c. receipt of inter-agency fund transfer.
d. receipt of NCA.

42. Which of the following statements is incorrect?

a. For subsequent measurement, government entities classify intangible assets into those
with finite and indefinite useful lives, similar to business entities.
b. Subsequent expenditures on recognized intangible assets are generally expensed unless
it is clear that the expenditures meet the recognition criteria for intangible assets.
c. A government entity acquires an intangible asset with indefinite useful life for ₱100.
Assuming the entity uses the maximum amortization period for intangible assets under
the GAM for NGAs, the appropriate annual amortization expense on the intangible asset
is ₱0.
d. The amortization of an intangible asset is credited directly to the intangible asset
account, according to the GAM for NGAs.

43. The GAM for NGAs is promulgated by the COA under the authority conferred to it by the
a. Philippine Accountancy Act
b. Philippine Constitution
c. Philippine Accounting Standards
d. State Audit Code (P.D. No. 1445)

44. According to the GAM for NGAs, deliberately overstating liabilities is

a. not prohibited under the prudence concept
b. allowed because only the overstatement of assets is not acceptable
c. prohibited based on the concepts of relevance and materiality
d. prohibited based on the concept of faithful representation.

45. It is the expenditure authority derived from appropriation laws, government ordinances,
and other decisions related to the anticipated revenue or receipts for the budgetary period.
a. Approved Budget
b. Notice of Cash Allocation
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c. General Appropriations Bill

d. Allotment

46. No journal entry is made for a disbursement under this mode of disbursement.
a. LDDAP-ADA
b. CPC
c. eMDS
d. None of these

47. The receipt of a disbursement authority in the form of Non-Cash Availment Authority
(NCAA) is debited to which of the following accounts?
a. Subsidy from National Government
b. Cash-Modified Disbursement System (MDS), Regular
c. Accounts Payable
d. Cash-Constructive Income Remittance

48. Which of the following transactions is not recorded through a credit to the “Cash-Modified
Disbursement System (MDS), Regular” account?
a. Reversion of unused NCA at the end of the period.
b. Constructive remittance of taxes withheld to the BIR.
c. Payment of accounts payable wherein the tax portion is withheld.
d. Granting of cash advance for payroll.

49. This account is credited when government entities remit collections to the National
Treasury.
a. Cash-Modified Disbursement System (MDS), Regular
b. Cash-Treasury/Agency Deposit, Regular

c. Cash-Collecting Officers
d. Cash-Tax Remittance Advice

50. All of the above involves the physical transfer of cash except
a. Remittance of collections of revenue to the National Treasury
b. Remittance of employee contributions to GSIS, Pag-IBIG and PhilHealth
c. Remittance of taxes through the Tax Remittance Advice
d. Remittance of excess cash advance by an officer

51. The third step in the Budget Preparation phase of the Budget Cycle is
a. President’s Budget
b. Budget Hearings
c. President’s Enactment
d. Budget Call

52. Which of the following is not one of the objects of expenditures under the GAM for NGAs?
a. PS
b. MOOE
c. CF
d. All of these are objects of expenditures under the GAM for NGAs.

53. When does a government entity recognize dividend income?

a. on a time proportion basis that takes into account the effective yield on the asset
b. when earned in accordance with the substance of the relevant agreement
c. when the entity’s right to receive payment is established
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d. when the significant risks and rewards are transferred

54. Government expenditures classified as MOOE are those that

a. pertain to finance costs
b. pertain to all types of employee benefits
c. pertain to various operating expenses other than employee benefits and financial
expenses
d. pertain to capitalizable expenditures

Use the following information for the next three questions:

On January 1, 20x1, Entity A acquires 5-year, 5%, ₱1,000,000 face amount bonds for
₱957,876 and classifies them as available for sale financial assets. The issuer pays annual
interest every December 31. The effective interest rate is 6%. On December 31, 20x1, the bonds
have a fair value of ₱980,000.

55. How much is the carrying amount of the bonds on Entity A’s December 31, 20x1 statement
of financial position?
a. 980,000
b. 957,867
c. 965,349
d. 973,270

Amortization Table:
Interest Interest
Date received income Amortization Present value
1/1/x1 957,876
12/31/x1 50,000 57,473 7,473 965,349
12/31/x2 50,000 57,921 7,921 973,270
12/31/x3 50,000 58,396 8,396 981,666
12/31/x4 50,000 58,900 8,900 990,566
12/31/x5 50,000 59,434 9,434 1,000,000

56. How much is the interest income in 20x1?

a. 50,000
b. 57,473
c. 57,921
d. 58,800

57. How much is the gain or loss recognized in net assets/equity?

a. (20,000)
b. 22,124
c. (22,124)
d. 14,651

980,000 fair value - 965,349 = 14,651

58. Entity A had the following balances at December 31, 1999:

 Cash in checking account 35,000
 Cash in money market account 75,000
 Treasury bill, purchased 11/1/1999, maturing 1/31/2000 350,000
 Treasury bill, purchased 12/1/1999, maturing 3/31/2000 400,000
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Entity A’s policy is to treat as cash equivalents all highly liquid investments with a maturity of
three months or less when purchased. What amount should Entity A report as cash and cash
equivalents in its December 31, 1999 statement of financial position?
a. 110,000
b. 385,000
c. 460,000
d. 860,000

(35,000 + 75,000 + 350,000) = 460,000

59. Entity A purchased a machine costing ₱125,000 for its manufacturing operations and paid
shipping costs of ₱20,000. Entity A spent an additional ₱10,000 testing and preparing the
machine for use. What amount should Entity A record as the cost of the machine?
a. 155,000
b. 145,000
c. 135,000
d. 125,000

(125,000 + 20,000 + 10,000) = 155,000

60. On December 31, 20X6, a building owned by Entity A was totally destroyed by fire. The
building had fire insurance coverage up to ₱500,000. Other pertinent information as of
December 31, 20X6, follows:

Building, carrying amount ₱520,000

Building, fair market value 550,000
Removal and clean-up costs 10,000

During January 20X7, before the 20X6 financial statements were issued, Entity A received
insurance proceeds of ₱500,000. On what amount should Entity A base the determination of
its loss on involuntary conversion?
a. 520,000
b. 530,000
c. 550,000
d. 560,000

(520,000 + 10,000) = 530,000. The insurance is accounted for as a separate event.

61. Entity A uses straight-line depreciation for its property, plant, and equipment, which,
stated at cost, consisted of the following:
12/31/X6 12/31/X5
Land ₱ 25,000 ₱ 25,000
Buildings 195,000 195,000
Machinery & Equipment 695,000 650,000
Accumulated depreciation 400,000 370,000

Entity A depreciation expense for 20X6 and 20X5 was ₱55,000 and ₱50,000, respectively.
What amount was debited to accumulated depreciation during 20X6 because of property,
plant, and equipment retirements?
a. 40,000
b. 25,000
c. 20,000
d. 10,000
 P a g e | 12

Accumulated Depreciation
370,000 beg.
disposals (squeeze) 25,000 55,000 depreciation
end. 400,000

62. Entity A started construction of a new office building on January 1, 20X4, and moved into
the finished building on July 1, 20X5. Of the building's ₱2,500,000 total cost, ₱2,000,000
was incurred in 20X4 evenly throughout the year. Entity A 's incremental borrowing rate
was 12% throughout 20X4, and the total amount of interest incurred by Entity A during
20X4 was ₱102,000. What amount should Entity A report as capitalized interest at
December 31, 20X4?
a. 102,000
b. 120,000
c. 150,000
d. 240,000

BC based on weighted average expenditures = [(2M ÷ 2) x 12%] = 120,000

Actual BC = 102,000
Capitalizable BC = 102,000 lower

63. Which of the following statements is correct?

a. Entity A acquires equipment from a supplier, on account. A lender settles the account of
Entity A by directly paying the supplier the proceeds of a loan payable that is recorded
in the BTr’s books. This transaction is called Cash Disbursement Ceiling (CDC).
b. All disbursements shall be made through Disbursement Vouchers (DVs) or Payroll
which are approved by the Head of the Requisitioning Unit.
c. Government entities are not allowed by law to make purchases using credit card.
d. The Non-Cash Availment Authority (NCAA) is a disbursement authority issued to
government agencies with foreign service posts.
e. No additional cash advance shall be given to any official or employee unless the
previous cash advance given to him is first liquidated.

64. On January 2, 20X5, Entity A purchased a franchise with a useful life of ten years for
₱50,000. An additional franchise fee of 3% of franchise operation revenues must be paid
each year to the franchisor. Revenues from franchise operations amounted to ₱400,000
during 20X5. In its December 31, 20X5, statement of financial position, what amount
should Entity A report as an intangible asset-franchise?
a. 33,000
b. 43,800
c. 45,000
d. 50,000

(50,000 x 9/10) = 45,000

65. Which of the following statement is incorrect?

a. A check disbursement is normally recorded as a credit to the “Cash-Modified
Disbursement System (MDS), Regular” account.
b. Both the ORS and RAOD are updated each time an obligation is incurred, a payable is
recorded for the obligation incurred, and disbursements are made to settle the recorded
payables.
 P a g e | 13

c. At the end of each year, an adjustment is made to revert any unused NCA of a
government entity.
d. The GAM for NGAs requires the Collecting Officer to issue an official receipt to
acknowledge the receipt of the Notice of Cash Allocation.
e. The entry to record the reversion of unused NCA at the end of the period is the exact
opposite of the entry used to record the receipt of NCA.

66. On December 31, 1998, Entity A had the following cash balances:
Cash in banks ₱1,800,000
Petty cash funds (all funds were reimbursed on 12/31/98) 50,000

Cash in banks includes ₱600,000 of compensating balances against short-term borrowing

arrangements at December 31, 1998. The compensating balances are not legally restricted as
to withdrawal by Entity A. In the current assets section of Entity A's December 31, 1998
statement of financial position, what total amount should be reported as cash?
a. 1,200,000
b. 1,250,000
c. 1,800,000
d. 1,850,000

(1,800,000 + 50,000) = 1,850,000

67. Which of the following statement is incorrect?

a. Technically, only the Journals and Ledgers are considered accounting records; the
Registries are budget records.
b. Separate accounting records and budget registries are maintained for each fund cluster.
c. Government entities and business entities use the term “obligation” or the phrase
“incurrence of obligation” similarly.
d. The various registries maintained by government entities primarily serve as internal
control for controlling and monitoring the conformance of actual results with the
approved budget.

68. Entity A had the following bank reconciliation at March 31, 1997:
Balance per bank statement, 3/31/97 ₱46,500
Add deposit in transit 10,300
56,800
Less outstanding checks 12,600
Balance per books, 3/31/97 ₱44,200

Data per bank for the month of April 1997 follow:

Deposits ₱58,400
Disbursements 49,700

All reconciling items at March 31, 1997, cleared the bank in April. Outstanding checks at April
30, 1997, totaled ₱7,000. There were no deposits in transit at April 30, 1997. What is the cash
balance per books at April 30, 1997?
a. 48,200
b. 52,900
c. 55,200
d. 58,500

Per bank
3/31/97
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46,500
Disbursement
Deposits
s 49,700 58,400

4/30/97 55,200

Per books (squeeze) 48,200 Per bank 55,200

CM DIT
DM OC (7,000)
Adjusted 48,200 Adjusted 48,200

69. Which of the following statements is correct?

a. All revenues shall be remitted to the BTr and included in the Special Fund, unless
another law specifically requires otherwise.
b. Payments to government entities in the form of checks are not allowed.
c. Revenues of a government entity arise from exchange transactions only.
d. According to the GAM for NGAs, revenue from exchange transactions are measured at
the amount of cash received.
e. When cash flows are deferred, the fair value of the consideration receivable is its
present value.

70. In preparing its bank reconciliation at December 31, 1994, Entity A has available the
following data:

Balance per bank statement, 12/31/94 ₱38,075

Deposit in transit, 12/31/94 5,200
Outstanding checks, 12/31/94 6,750
Amount erroneously credited by bank to Entity A's
account, 12/28/94 400
Bank service charges for December 75

Entity A's adjusted cash in bank balance at December 31, 1994, is

a. 36,525
b. 36,450
c. 36,125
d. 36,050

38,075 + 5,200 – 6,750 – 400 = 36,125

71. For government entities, the capitalization threshold for PPE is

a. ₱15,000 or more
b. not less than ₱25,000
c. more than ₱15,000
d. at least ₱5,000

72. Which of the following statements is incorrect?

a. The constructive remittance of taxes withheld through the TRA gives rise to the
recognition of revenue.
b. According to the GAM for NGAs, the receipt of concessionary loans by government
entities may give rise to revenue recognition.
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c. Taxes are compulsory payments, imposed on persons, properties or activities, intended

to provide revenue to the government. Taxes include fees, fines and penalties.
d. The main source of revenue for the government is taxes.

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

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

a. IV, I, II, V and III

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

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

75. Intangible assets held by government entities are measured as follows:

Initial Subsequent
a. cost cost less accumulated amortization and
impairment losses
b. cost fair value less accumulated amortization
and impairment losses
c. cost fair value through surplus or deficit
d. a or b

76. Which of the following statements is correct?

a. All disbursements require prior certifications to establish their validity and legality. A
certification for fictitious obligation is void and results to civil liability by the certifying
officials, but not criminal liability.
b. According to the GAM for NGAs, the Advice to Debit Account (ADA) mode of
disbursement can be used only if the payee maintains an account in the same bank
where the government entity maintains its account.
c. Disbursements through the Cash Disbursement Ceiling (CDC) results to the recognition
of a loan payable in the books of accounts of the BTr.
d. Under the Advice to Debit Account (ADA) mode of disbursement, payments from a
government entity are directly credited to the bank accounts of the payees through
bank transfers.
e. The only valid modes of disbursement for a government entity are through cash or
check.

77. Which of the following is recorded in the Obligation Request and Status (ORS)?
a. Receipt of notice of appropriation
b. Receipt of allotment from the DBM
c. Receipt of Notice of Cash Allocation from the DBM
d. Entering into employment contracts with employees
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78. The receipt of an allotment is recorded by a government entity in the

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

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

80. Which of the following statements is correct?

a. If it is not clear whether an expenditure is a research or a development cost, it is treated
as development cost.
b. The development costs of an internally generate intangible asset may be capitalized if
certain conditions are met.
c. A government entity does not amortize intangible assets.
d. Government entities amortize all of their intangible assets over a period of 2 to 10 years,
unless a more appropriate estimate of useful life is available.
e. Government entities normally assign their intangible assets a residual value of 5% of
cost.

“I press on toward the goal to win the prize for which God has called me
heavenward in Christ Jesus.” (Philippians 3:14)

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