Republic of the Philippines

Romblon State University

College of Business and Accountancy
Odiongan, Romblon

Final Examination in Accounting for Government and Non-Profit Organizations

Name _______________________________________ Score _________ Rating _________

Direction: Using the provided answer sheet, BLACKEN the circle representing the letter of your chosen answer.
Only a single erasure (mark it X) is allowed. ANSWER ONLY 70 ITEMS.

1. Which of the following is not an indicator of reliable measurement for an asset?

a. Benefits can be expected on the basis of available evidence or logic.
b. Valuation method is free from material error or bias.
c. Faithful representation of the asset’s benefits.
d. Reliable information will, without bias or undue error, faithfully represent those transactions and events.
2. It refers to the disbursement authority issued by the DBM to agencies with foreign operations allowing them to
use the income collected by their Foreign Service Posts to cover their operating requirements.

a. Notice of Cash Allocation (NCA) c. Cash Disbursement Ceiling (CDC)

b. Tax Remittance Advice (TRA) d. Non-Cash Availment Authority (NCAA)
3. Account titles in the Revised Chart of Accounts (RCA) are arranged according to this sequence
a. Assets, Equity, Liability, Revenue, and Expenses
b. Assets, Liability, Equity, Revenue, and Expenses
c. Assets, Expenses, Liability, Equity and Revenue
d. In no particular order.
4. Which of the following is an indication of impairment from internal sources?
a. 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.
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. 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.
d. 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.
5. Entity A, a government entity, had the following transactions during the period:
 Received Notice of Cash Allocation (NCA) amounting to ₱1,226,618.
 Earned total revenue of ₱1,598,000 from billings and collections of unbilled income.
 Incurred total expenses of ₱791,652.
 Remitted total taxes withheld of ₱87,460 to the BIR through Tax Remittance Advice (TRA).
 The “Cash-Modified Disbursement System (MDS), Regular” has an unused balance of ₱132,196 at the end of
the period.

How much is the surplus (deficit) for the period?

a. 1,988,230 c. 1,742,320
b. 1,898,230 d. 1,988,320

Use the following information for the next four questions:

Entity A grants a cash advance of ₱2,000 for the traveling expenses of an officer. Actual expenses amount to
₱1,800. The officer remits the excess cash advance.

6. The entry to record the grant of cash advance is

a. Advances to Officers and Employees 2,000
Cash – Disbursing Officer 2,000

b. Advances to Officers and Employees 2,000

Cash – Modified Disbursement System (MDS), Regular
2,000
c. Advances to Officers and Employees 2,000
Cash – Collecting Officer 2,000
d. Any of these.
7. The disbursement is recorded in the
a. Journal and Ledger c. ORS
b. RAOD d. All of these
8. The entry to record the liquidation of the cash advance is All
a. Traveling Expenses – Foreign 1,800
Advances to Officers and Employees 1,800
b. Traveling Expenses – Foreign 1,800
Due to Officers and Employees 1,800
c. Cash – Collecting Officers 1,800
Advances to Officers and Employees 1,800
d. a and c
9. The entry to record the receipt and deposit of refund of excess cash advance is
a. Cash – Collecting Officers
Advances to Officers and Employees 200
b. Cash – Treasury/Agency Deposit, Regular 200
Cash – Collecting Officers 200
c. a and b 200
d. neither a nor b
10. This refers to valid and legal obligations of NGAs/OUs, for which, goods/services/projects have been
delivered/rendered/completed and accepted, regardless of the year when these obligations were incurred.
a. Accounts payable c. Not Yet Due and Demandable
b. Obligations d. Liability
11. Which of the following is not an essential characteristic of a financial instrument?
a. There must be a contract.
b. There are at least two parties to the contract.
c. The contract gives rise to both a financial asset of one party and a financial liability or equity
instrument of another party.
d. It is subsequently measured at fair value.
12. When determining depreciation, an entity considers all of the following except
a. Initial cost
b. Useful life
c. Expected residual value at the end of the asset’s useful life
d. Whether the asset is classified as with finite or indefinite useful life.
13. Entity A spends ₱20,000 on the repair of one of its equipment. It is not clear whether the repair is a major repair or
a minor repair. In accordance with the GAM for NGAs, how should Entity A account for the repair cost?
a. As a minor repair c. As an addition
b. As a major repair d. a or b
14. The Statement of Comparison of Budget and Actual Amounts is dated
a. As of the reporting date c. Either a or b
b. For a given reporting period d. Not dated
15. The main purpose of the Statement of Comparison of Budget and Actual Amounts is
a. to provide a basis for increasing the budget in the following fiscal year.
b. to provide information regarding the government’s financial condition vis-a-vis the resources entrusted to it.
c. to enhance the transparency of the government’s financial reporting.
d. to provide information regarding the government’s financial performance.

16. The statement of management responsibility for financial statements attached to a government agency’s
combined financial statements (operating units, regional offices, and main office) would most likely be
a. dated not later than February 14 of the year following the reporting period.
b. dated not earlier than February 14 of the year following the reporting period.
c. signed by the agency’s Head, together with the agency’s Secretary and Treasurer.
d. none of these.

17. Entity A is a government hospital. Entity A operates a pharmacy within the hospital. Entity A would most likely
recognize revenue from sales of medicines in the pharmacy
a. upon billing, when goods are transferred to the buyer.
b. on a straight-line basis.
c. by reference to the stage of completion at the reporting date.
d. in accordance with the substance of the relevant agreement which requires an in-depth analysis by a CPA who
studied accounting for four to five years, or more.

18. Which of the following is not one of the classifications of inventory held by a government entity?
a. Inventory Held for Distribution d. Inventory Held for Consumption
b. Inventory Held for Long-term Use e. Semi-Expendable Property
c. Inventory Held for Manufacturing
 19. Which of the following may not be included in the inventories of a government entity?
a. rice and other welfare goods held for distribution
b. raw materials and work-in-process
c. accountable forms
d. equipment costing ₱ 50,000

20. Entity A exchanges an item of PPE with Entity B. How should Entity A account for any cash paid or received
from the exchange?
a. Add the cash paid to the initial measurement of the asset received.
b. Deduct the cash paid from the initial measurement of the asset received.
c. Add the cash received to the initial measurement of the asset received.
d. Account for any cash paid or received in gain or loss but not on the initial measurement of the asset received.

21. According to the GAM for NGAs, these assets are those which have historical, cultural and environmental
significance, and are intended to be preserved for future generations.

a. Cultural assets b. Infrastructure assets c. Heritage assets d. Historical assets

Use the following information for the next two questions

At the beginning of Year 1, a government entity acquires an intangible asset for ₱100,000. The intangible asset
has a useful life of 10 years. At the end of Year 3, the entity determines an indication of impairment and makes the
following estimates:
Fair value less costs to sell 60,000
Value in use 50,000

22. How much is the impairment loss?

a. 10,000 c. 30,000
b. 20,000 d. 0
23. At the end of Year 6, Entity A determines an indication that the previous impairment may no longer exist and makes
the following estimates:
Fair value less costs to sell 32,000
Value in use 38,000

How much is the gain on the reversal impairment loss?

a. 3,714 c. 8,714
b. 5,714 d. 0
24. Entity A leased a new machine to Entity B on January 1, 20x1. The lease expires on January 1, 20x6. The annual
rental is ₱90,000. Additionally, on January 1, 20x1, Entity B paid ₱50,000 to Entity A as a lease bonus and
₱25,000 as a security deposit to be refunded upon expiration of the lease. In Entity A's 20x4 statement of financial
performance, the amount of rental revenue should be
a. 140,000 c. 100,000
b. 125,000 d. 90,000
25. Which of the following statements is correct regarding the presentation of financial statements by government
entities?
a. Changes in accounting policies may be accounted for by prospective application.
b. Non-adjusting events are never recognized but are always disclosed.
c. Prior period errors are corrected by retrospective application.
d. Just like business entities, government entities may (if they choose to) prepare interim financial statements on a
quarterly basis.

26. The notes to the financial statements is least likely to be expected to show which of the following
information?
a. General information on the reporting entity.
b. Current and noncurrent distinctions of assets and liabilities.
c. Statement of compliance with the PPSAS and basis of preparation of financial statements.
d. Summary of significant accounting policies.
27. A change in accounting estimate is accounted for
a. using the transitional provision, if any. c. by prospective application.
b. by retrospective application. d. any of these
28. This is attached to the annual general-purpose financial
statements of a government entity as a cover letter.
a. President’s Budget Message
b. Report on Highlights and Executive Summary
c. Statement of Management Responsibility for Financial
Statements
d. Dedications, acknowledgments and best wishes.
29. The main purpose of the statement of comparison of budget and actual amounts is
a. to apply the concepts of responsibility accounting.
b. to enhance the transparency of financial reporting of the government.
c. to show information not presented on the face of the other components of a complete set of general
purpose financial statements.
d. to provide vital information needed in impeachment proceedings.

30. Which of the following applies to business entities but not to government entities?
a. Finance lease accounting by lessors.
b. Noncurrent asset held for sale classification.
c. Direct method of presenting cash flows from operating activities.
d. Cash equivalents classification for debt instruments acquired three months before their maturity date.

31. Which of the following applies to business entities but not to government entities?
a. Accounting for biological assets at fair value less costs to sell.
b. Preparation of interim financial statements.
c. Presenting information on earnings per share.
d. Continued depreciation of idle equipment.

32. The accounting for government entities differs from the accounting for business entities in which of the following
respects?
a. Accounting for exchanges of property, plant and equipment.
b. Accounting for exchanges of intangible assets.
c. Accounting policy choice for the subsequent measurement of investment property.
d. Classification of intangible assets as either with finite or with indefinite useful life for purposes of
subsequent measurement.

33. Which of the following statements is correct?

a. All disbursements shall be made through Disbursement Vouchers (DVs) or Payroll which are approved by the
Head of the Requisitioning Unit.
b. The Non-Cash Availment Authority (NCAA) is a disbursement authority issued to government agencies with
foreign service posts.
c. 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.
d. Disbursements through the Cash Disbursement Ceiling (CDC) results to the recognition of a loan payable in the
books of accounts of the BTr.
e. 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.

34. The accounting for government entities differs from the accounting for business entities in which of the following
respects?
a. Classification of joint ventures.
b. Consolidation procedures when preparing consolidated financial statements.
c. Disclosure of events after the reporting date.
d. Impairment requirements, and reversals thereof, for noncurrent assets.

35. The statement of cash flows of government entities

a. shows the historical changes in cash and cash equivalents
b. shows prospective information on budgeted amounts of expected future cash flows
c. a and b
d. is prepared using the accrual basis of accounting

36. The classification of leases under the GAM for NGAs is based on
a. the form of the contract rather than the substance of the transaction.
b. the extent of transfer of risks and rewards incidental to ownership of the leased asset from the lessor to the
lessee.
c. the significance in value of the leased asset.
d. the significance in value of the leased asset and the length of the lease term.
37. Lessee enters into a lease contract with Lessor. Which of the following would most likely indicate a
substantial transfer of risks and rewards incidental to ownership of an asset?
a. The lease term is 10 years for an annual lease payment of ₱5,000,000.
b. Lessee has the option to extend the lease for the remaining half of the leased asset’s useful life for the same
amount of annual lease payment which is expected to be lower than the market rate during the extended period.
c. The lease transfers ownership of the leased asset to the Lessee if the Lessee pays the Lessor the leased
asset’s fair value, to be determined on payment date.
d. The Lessee has the unilateral right to cancel the lease after the first 5 years of the lease term without any
significant costs.
38. On the statement of activities for a private not-for-profit institution, the account, net assets released from restrictions,
would be shown under revenues, gains, and other support as a (use SFAS 117 in answering this question)
a. Decrease in permanently restricted and an increase in temporarily restricted net assets.
b. Decrease in restricted and an increase in temporarily restricted net assets
c. Decrease in temporarily restricted and increase in permanently restricted net assets.
d. Decrease in temporarily restricted and increase in unrestricted net assets.
39. A statement of functional expenses is required for which of the following private not-for-profit institutions?
(use SFAS 117 in answering this question)

a. Hospital c. Fraternal organization

b. Voluntary health and welfare organization d. College

40. A government entity derecognizes which of the following?

a. Idle PPE c. Fully depreciated PPE

b. Unserviceable PPE d. Partially damaged PEE

41. Which of the following statements is incorrect regarding the accounting for unreleased checks by a
government entity?
a. The accounting procedures for unreleased checks prescribed under the GAM for NGAs apply only to
commercial checks.
b. Unreleased checks are reverted back to cash.
c. At the start of the year, a reversing entry is made for the unreleased checks in the previous year.
d. Unreleased checks are perforated.

42. On January 1, 20x1, the biological assets of Entity A consist of two 1-year old animals with fair value less costs to
sell of ₱1,000 each.

The following transactions occurred during the period:

 On July 1, 20x1, two 1-year old animals are acquired for ₱1,100 each, equal to the FVLCS on this date.
 On October 1, 20x1, two animals are born. The FVLCS of a newborn on this date is ₱500.

The FVLCS on December 31, 20x1 are as follows:

Age FVLCS
new born ₱600
3 mos. old ₱800
1 yr. old ₱1,200
1.5 yr. old ₱1,500
2 yrs. old ₱2,000

How much is the total gain from the change in FVLCS during the period?
a. ₱ 3,800 b. ₱ 4,200 c. ₱ 4,400 d. ₱ 4,800

43. An office equipment representative has a machine for sale or lease. If you buy the machine, the cost is
₱7,596. If you lease the machine, you will have to sign a non-cancelable lease and make 5 payments of
₱2,000 each. At the time of the last payment you will receive title to the machine. The first payment will be made
one period after the first day of the lease. The interest rate implicit in this lease is approximately

a. 10% b. 12% c. Between 11% and 12% d. 16%

44. Which of the following information is not reported in the statement of changes in net assets/equity?
a. Effects of current period errors.
b. Surplus or deficit for the period
c. Items of revenue and expense that are recognized directly in equity
d. The balance of accumulated surpluses or deficits at the beginning of the period and at the reporting date,
and the changes during the period.

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

46. Which of the following does not affect the amount of surplus or deficit that is reported in the statement of financial
performance?
a. receipt of NCA
b. constructive remittance of taxes withheld through TRA
c. closing of the “Cash-Treasury/Agency Deposit, Regular” account
d. adjustment of the “Cash-Modified Disbursement System (MDS), Regular” account for the unused
Notice of Cash Allocation.
e. All of these affect surplus or deficit.

47. GAO College, a private not-for-profit college, received the following cash inflows:
 ₱400,000 from students for tuition.
 ₱200,000 from a donor who stipulated that the money be invested indefinitely and the earnings used for student
scholarships.
 ₱100,000 from a donor who stipulated that the money be spent according to the wishes of the Board of
Trustees.
Which amounts of these cash flows should be shown on the cash flow statement as cash from operating
activities?
a. ₱ 700,000 b. ₱ 400,000 c. ₱ 600,000 d. ₱ 500,000
 48. On December 30, 20X2, LULI Museum, a not-for-profit organization, received a ₱7,000,000 donation of Day Co.
shares with donor stipulated requirements as follows:
 Shares valued at ₱5,000,000 are to be sold with the proceeds used to erect a public viewing building.
 Shares valued at ₱2,000,000 are to be retained with the dividends used to support current operations.

LULI adopted of FASB Statement No. 117, Financial Statements of Not-for-Profit Organizations. As a consequence of
the receipt of the Day shares, how much should LULI report as temporarily restricted net assets on its 20X2
statement of financial position?

a. ₱ 0 b. ₱2,000,000 c. ₱ 5,000,000 d. ₱ 7,000,000

49. CIBA, a non-profit performing arts organization, received a contribution of a term endowment and a regular
endowment. These endowments should be reported on the statement of activities as:
Term Endowments Regular Endowments
b. Permanently restricted Permanently restricted
c. Temporarily restricted Permanently restricted
d. Temporarily restricted Temporarily restricted
e. Unrestricted Temporarily restricted

50. Vista, a voluntary health and welfare organization, received a donation of ₱100,000 to be spent in
accordance with the wishes of the institution’s Board of Trustees. This donation should be reported on the statement
of activities as:
a. Unrestricted revenue. c. Temporarily restricted revenue
b. Other income – gifts. d. Permanently restricted revenues

51. Ellen College, a private not-for-profit institution, received a ₱100,000 grant for faculty research in 20x1. The grant
money was not spent until 20x2. For 20x1, Ellen College should report the contribution as:

c. Unrestricted revenue c. Other operating revenue.

d. Temporarily restricted revenue. d. Other non-operating revenue.

52. An NPO hospital has the following account balances:

Amount charged to patients ₱500,000

Revenue from newsstand 15,000
Undesignated gifts 40,000
Contractual adjustments 70,000
Interest income 12,000
Salaries expense – nurses 120,000
Bad debts 8,000
What is the hospital’s net patient service revenue?
a . ₱422,000 c. ₱500,000
b. ₱430,000 d. ₱540,000

53. Home Care, Inc., a nongovernmental voluntary health and welfare organization, received two contributions in 2003.
One contribution of ₱250,000 was restricted for use as general support in 2004. The other contribution of
₱200,000 carried no donor restrictions. What amount should Home Care report as temporarily restricted
contributions in its 2003 statement of activities.
a. ₱450,000 b. ₱250,000 c. ₱200,000 d. ₱0

54. The Weyman Hospital, a private, not-for-profit institution, reported the following information:
Gross patient service revenue ₱ 1,000,000
Allowance for discounts to hospital employees 20,000
Bad debt expense 40,000
Contractual adjustments 100,000
What amount should the hospital report as net patient service revenue?
a. ₱ 840,000 b. ₱ 900,000 c. ₱ 880,000 d. ₱ 980,000

55. A private not-for-profit hospital provided ₱150,000 in charity care for the current year. The hospital should report this
charity care as
a. Net patient service revenue of ₱150,000 and patient care expense of ₱150,000.
b. Net patient service revenue of ₱150,000 on the statement of operations.
c. Only in the notes to the financial statements.
d. As an unpaid accounts receivable on the balance sheet.
 56. The Johnson Hospital, a private not-for-profit hospital, received the following revenues in the current year:
Proceeds from sales of the Hospital’s flower shop ₱60,000
Dividends and interest revenue not restricted ₱20,000
Cash contributions for the renovation of the children’s ward in the Hospital ₱200,000

Which of these amounts should be reported as other revenues and gains (other revenue) on the Statement of
Operations?
a. ₱280,000 b. ₱60,000 c. ₱80,000 d. ₱260,000

57. A hospital has the following account balances:

Revenue from newsstand ₱ 50,000

Amounts charged to patients 800,000
Interest income 30,000
Salary expense – nurses 100,000
Bad debts 10,000
Undesignated gifts 80,000
Contractual adjustments 110,000

What is the hospital’s net patient service revenue?

a. ₱880,000 b. ₱800,000 c. ₱690,000 d. ₱680,000

58. Electra, a not-for-profit performing arts organization, held some donor restricted endowment funds which are
invested in stocks that are listed on the NY Stock Exchange, so the fair values are readily determinable. Most of the
investments represent amounts between 2% and 5% of the outstanding common stock of the investee corporations.
However, Electra does own stock in one company that gives it the ability to exercise significant influence over
the operating and financing policies of the investee company. How should these two types of investments be
reported on Electra’s Statement of Financial Position at year end?
Equity Securities Equity Securities
2% - 5% ownership significant influence
e. Fair value Fair value
f. Equity method Equity method
g. Fair value Equity method
h. Fair value Carrying value

59. A private not-for-profit performing arts center receives the following three donations:
 A gift of ₱90,000 which is unrestricted.
 A gift of ₱125,000 restricted for payment of salaries.
 A gift of ₱200,000 that is restricted forever but the income from the gift may be used for current
expenditures.
Which of the following is not true?
a. Temporarily restricted net assets increased by ₱125,000.
b. Permanently restricted net assets increased by ₱325,000.
c. When the money is spent for salaries, unrestricted net assets increase and decrease by the same amount.
d. When the money is spent for salaries, temporarily restricted net assets decrease.

60. Cash flows from a public university bookstore would appear on the statement of cash flows as
a. Cash flows from operations.
b. Cash flows from investing activities.
c. Cash flows from financing activities.
d. Cash flows from noncapital financing

61. Which one of the following is not a required financial statement for a private voluntary health and welfare
organization?
a. Statement of Financial Position
b. Statement of Activities and Changes in Net Assets
c. Statement of Fund Balance
d. Statement of Cash Flows
e. Statement of Functional Expense

62. Gerlack College, a private, not-for-profit institution, received a donation of ₱2,000,000 as a challenge grant. If the
college raises an additional ₱2,000,000 within the next two years, it may keep the donation. If it fails, the
₱2,000,000 must be returned to the donor. How would the college record the receipt of the grant?
a. Unrestricted revenue. c. Note to the financial statement.
b. Temporarily restricted revenue. d. Refundable advance.

63. Which of the following transactions of a private voluntary health and welfare organization would increase temporarily
restricted net assets in the statement of activities for the current year?
I. Received a contribution of ₱20,000 from a donor in the current year who stipulated that the money not be
spent until the following year.
II. Spent ₱25,000 for fundraising during the current year from a donation from the previous year.
a. I only b. I and II c. II only d. Neither
64. On December 31, 20X1, the Board of Trustees of a private, not-for-profit college designated ₱5,000,000 of
unrestricted net assets for the construction of an addition to the music building. What effect does this
designation have on the college’s unrestricted and temporarily restricted net assets shown on the statement of
financial position on December 31, 20X1?
Unrestricted Net Assets Temporarily restricted Net Assets
a. Decrease Increase
b. Decrease No effect
c. No effect Increase
d. No effect No effect

65. The following contributions were received by a private voluntary health and welfare organization. Which of these
would not be recorded as an increase in unrestricted revenue?

a. A carpenter donated labor and materials for the construction of a deck.

b. A painter donated paint and labor to paint all the meeting rooms.
c. A retired college professor donated reading services to senior citizens. The organization would not have
paid for these services if they had not been donated.
d. A CPA firm donated its services to audit the financial statements for the past year.

66. In November 20x1 Gilmore Heating and Air Conditioning Service repaired the air conditioning system for GenCare,
a voluntary health and welfare organization and mailed an invoice for ₱3,000. On December 25, a note was
received by GenCare indicating that Gilmore was canceling the invoice and that repairs were being donated. For
the year ended, December 31, 20x1, GenCare should report these contributed services as:

a. A footnote.
b. No disclosure is required but a thank-you note was mailed to Gilmore.
c. An increase in unrestricted revenues and an increase in expenses on the statement of activities.
d. An increase in temporarily restricted net assets in the statement of activities.

67. Which of the following types of health care organizations recognize depreciation expense? Investor-
Owned Not-for-Profit Organizations Governmental Health Care
Health Care Enterprises Organizations
a. Yes Yes No
b. Yes No Yes
c. No No Yes
d. Yes Yes Yes

68. Entity A, a government entity, has an unused NCA of ₱50,000 at the end of the current year. The entry to record the
reversion of unused NCA is

a. Subsidy from National Government 50,000

Cash-Modified Disbursement
System (MDS), Regular 50,000
b. Accumulated Surplus/(Deficit) 50,000
Cash-Treasury/Agency Deposit,
Regular 50,000
c. Subsidy from National Government 50,000
Cash-Collecting Officers 50,000
d. No journal entry.

69. During the period, Entity A, a government entity, withheld ₱100,000 taxes from its payments to employees and
suppliers. On September 14 of the current year, Entity A remitted the taxes withheld to the BIR through Tax
Remittance Advice. The entry to record the remittance includes

a. Cash-Tax Remittance Advice

Due to BIR
b. Subsidy from National Government
Cash-Tax Remittance Advice
c. a and b
d. None of these.

70. Entity A, a government entity, bills ₱200,000 for Communications Network Fees. Which of the following is the
correct entry for the billing?

a. Cash-Collecting Officers 200,000

Communications Network Fees 200,000
b. Cash-Modified Disbursement System (MDS), Regular 200,000
Communications Network Fees 200,000
c. Accounts receivable 200,000
Subsidy from National Government 200,000
d. Accounts receivable 200,000
Communications Network Fees 200,000
 71. The entry to record the receipt of a disbursement authority in the form of Cash Disbursement Ceiling (CDC) is

a. Cash – Constructive Income Remittance xxx

xxx
Subsidy Income from National Government
b. Accounts Payable xxx
Subsidy from National Government xxx
c. Accounts Payable xxx
Cash-Modified Disbursement System (MDS), Regular xxx
d. Cash-Modified Disbursement System (MDS), Regular xxx
Subsidy from National Government xxx

72. Which of the following statements is incorrect?

a.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.
b.The GAM for NGAs requires the Collecting Officer to issue an official receipt to acknowledge the receipt of the
Notice of Cash Allocation.
c. A check disbursement is normally recorded as a credit to the “Cash-Modified Disbursement System (MDS),
Regular” account.
d.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.
e.At the end of each year, an adjustment is made to revert any unused NCA of a government entity.

73. 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

74. Entity A enters into a long-term contract to provide services. The outcome of the transaction can be
estimated reliably and the progress on the contract can be measured with sufficient reliability. According to the
PPSAS, how should Entity A recognize revenue from the contract?
a. On a straight line basis over the contract term.
b. By reference to the stage of completion of the contract at the reporting date.
c. Full recognition of contract price upon completion of the contract.
d. Only to the extent of costs that are expected to be recovered.

75. According to the GAM for NGAs, interest revenue is recognized

a. on a time proportion basis using the effective interest method.
b. on a straight line basis.
c. in accordance with the substance of the relevant loan agreement.
d. when the entity’s right to receive payment is established.

76. Which of the following statements is correct?

a. The budget preparation in the Philippines uses a “bottom-up” approach. Under this approach, the budget
preparation starts from the highest levels of the government down to the lowest levels.
b. Government entities and business entities use the term “obligation” or the phrase “incurrence of
obligation” similarly.
c. The only valid modes of disbursement for a government entity are through cash or check.
d. A government entity must first receive an allotment before it can incur obligations.
e. An entity prepares its budget by simply rolling-over the budget in the previous year and adjusting each line item
by 10% increment to reflect inflation. This process is described as zero-based budgeting.

77. Which of the following would result to an increase or decrease in the revenue reported by a government entity in
its statement of financial performance?
a. Impairment loss on an amount already recognized as revenue.
b. Receipt of a pledge.
c. Receipt of donation in the form of services in kind.
d. The repayment of a loan payable is forgiven.

78. Which of the following statements is incorrect?

a. The Notice of Cash Allocation (NCA) is an authority issued by the DBM to central, regional and provincial
offices and operating units to cover their cash requirements.
b. Responsibility accounting greatly enhances budget accountability because managers are evaluated only in
terms of the costs or other variables that they control, and therefore, budget deviations can be readily attributed
to the managers accountable therefor.
c. Technically, only the Journals and Ledgers are considered accounting records; the Registries are budget
records.
d. Appropriation is also called obligational authority.
e. Separate accounting records and budget registries are maintained for each fund cluster.

Prepared By: Reviewed By: Approved By:

LOU V. FOJA, CPA, MABA ERROL S. FOJA, CPA, LPT, MABA RAY JOSEPH G. INOCENCIO, PhD
Associate Professor II Program Chairperson Dean