Government Accounting
FINAL EXAMINATION
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
Cash – Disbursing Officer
b.
Advances to Officers and Employees
Cash – Modified Disbursement
System (MDS), Regular
c.
Advances to Officers and Employees
Cash – Collecting Officer
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
a.
Traveling Expenses – Foreign
Advances to Officers and Employees
b.
Traveling Expenses – Foreign
Due to Officers and Employees
c.
Cash – Collecting Officers
Advances to Officers and Employees
2,000
2,000
2,000
2,000
2,000
2,000
1,800
1,800
1,800
1,800
1,800
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
200
Advances to Officers and Employees
200
b.
Cash – Treasury/Agency Deposit, Regular
200
Cash – Collecting Officers
200
c.
a and b
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.
c. Not Yet Due and Demandable
a. Accounts Payable
d. Liability
b. Obligations
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 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?
d. Inventory Held for Consumption
a. Inventory Held for Distribution
e. Semi-Expendable Property
b. Inventory Held for Long-term Use
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 ₱15,000
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
c. Heritage assets
b. Infrastructure 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. The operator in a service concession arrangement is a
a. government entity
c. separate entity
b. private entity
d. jeepney
31. 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.
32. 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.
33. 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.
34. 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.
35. 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.
36. 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
37. 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.
38. 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.
39. 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.
40. A statement of functional expenses is required for which of the following private not-for-profit institutions?
(use SFAS 117 in answering this question)
c. Fraternal Organization
a. Hospital
d. College
b. Voluntary Health and Welfare Organization
41. A government entity derecognizes which of the following?
a. Idle PPE
c. Fully depreciated PPE
b. Unserviceable PPE
d. Partially damaged PPE
42. Entity A, a government entity, receives notice that for the current year, the maximum amount it can
spend on maintenance and other operating expenses is ₱10B. This event can be described as
c. Appropriation
a. Notice of Cash Allocation
d. Budgetication
b. Allotment
43. 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.
44. 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
c. 4,400
b. 4,200
d. 4,800
45. 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%
c. Between 11% and 12%
b. 12%
d. 16%
46. If plotted on a graph, the periodic interest expenses recognized on bonds issued at a premium will show a:
(X axis – time; Y axis - ₱)
c. upward line sloping to the right
a. straight line
d. curvilinear line sloping here and there
b. downward line sloping to the right
47. 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.
48. Which of the following is not one of the special journals prescribed by the GAM for NGAs?
a. Sales Journal
c. Check Disbursements Journal
b. Cash Disbursements Journal
d. Cash Receipts Journal
49. The 8-digit Revised Chart of Accounts (RCA) Code for revenues starts with number
a. 1
c. 2
b. 5
d. None of these
50. 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.
51. Guil 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.
c. $600,000.
b. $400,000.
d. $500,000.
52. On December 30, 19X4, Leigh 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.
Leigh 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 Leigh report as temporarily restricted net
assets on its 19X4 statement of financial position?
a. $0
c. $5,000,000
b. $2,000,000
d. $7,000,000
53. 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
a. Permanently restricted
Permanently restricted
b. Temporarily restricted
Permanently restricted
c. Temporarily restricted
Temporarily restricted
d. Unrestricted
Temporarily restricted
54. 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:
c. Temporarily restricted revenue
a. Unrestricted revenue.
d. Permanently restricted revenues
b. Other income – gifts.
55. 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:
a. Unrestricted revenue
c. Other operating revenue.
b. Temporarily restricted revenue.
d. Other non-operating revenue.
56. 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
57. 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
c. $200,000
b. $250,000
d. $0
58. The Weyman Hospital, a private, not-for-profit institution, reported the following information:
Gross patient service revenue
Allowance for discounts to hospital employees
Bad debt expense
Contractual adjustments
$1,000,000
20,000
40,000
100,000
What amount should the hospital report as net patient service revenue?
a. 840,000
c. 880,000
b. 900,000
d. 980,000
59. 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.
60. 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
c. $80,000
b. $60,000
d. $260,000
61. 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?
c. $690,000
a. $880,000
d. $680,000
b. $800,000
62. 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
a. Fair value
Fair value
b. Equity method
Equity method
c. Fair value
Equity method
d. Fair value
Carrying value
63. 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
a.
b.
c.
of the following is not true?
Temporarily restricted net assets increased by $125,000.
Permanently restricted net assets increased by $325,000.
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.
64. Cash flows from a public university bookstore would appear on the statement of cash flows as
a. Cash flows from operations.
c. Cash flows from financing activities.
b. Cash flows from investing activities.
d. Cash flows from noncapital financing
65. 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
66. 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?
c. Note to the financial statement.
a. Unrestricted revenue.
d. Refundable advance.
b. Temporarily restricted revenue.
67. 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 fund raising during the current year from a donation from the previous year.
c. II only
a. I only
d. Neither
b. I & II
68. 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
69. 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.
70. 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.