Gov Acctg Solman Millan

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Gov Acctg Solman Millan
Government Accounting (University of La Salette)
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CHAPTER 1
PROBLEM 1-1: TRUE OR FALSE
True 1. Compared to the accounting for business entities, government accounting
places greater emphasis on the sources and utilization of government funds
and the management's stewardship over government resources.
True 2. Taxes are the main source of funds of the government.
True 3. Other sources of funds of the government include fees, borrowings, and grants
from other governments and international bodies.
False 4. Currently, the financial reporting of government entities is based on NGAs.
False 5. The principles used in the financial reporting of government entities are very
unique that only a very few of these principles are similar to those that are
applied to business entities.
True 6. The principles in the GAM for NGAs are similar to the principles in the PFRSs.
False 7. The GAM for NGAs is promulgated by the Philippine Congress under the
authority conferred to it under the Philippine Constitution.
True 8. A unique financial reporting requirement of government entities is the use of
fund cluster accounting. Under fund cluster accounting, separate books and
reports are prepared for each type of fund held by a government entity.
False 9. The GAM for NGAs is promulgated primarily to harmonized government
accounting standards with the U.S. GAAP.
False 10. An item is recognized as an asset if it meets both the "probable" future
economic benefits" and "reliable measurement" criteria, regardless of whether
the item is a resource controlled arising from past events.
PROBLEM 1-2: MULTIPLE CHOICE

1. Which of the following is a unique requirement of government accounting that is not required
in the accounting for business entities?
a. The use of double-entry recording system
b. The use of single-entry recording system
c. The use of accrual basis of accounting
d. The presentation of budget information in the financial statements
2. What is the legal basis of the COA in promulgating the GAM for NGAs?
a. PD 1445 State Audit Code of the Philippines
b. The Philippine Constitution
c. RA 9298 The Philippine Accountancy Act of 2004
d. Philippine Public Sector Accounting Standards
3. Which of the following is tasked in keeping the general accounts of the government,
supporting vouchers, and other documents?
a. COA
b. DBM
c. NGAs
d. Congress

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4. The Bureau of Treasury (BTR) is responsible for

a. promulgating accounting and auditing rules and regulations.
b. the formulation and implementation of the national budget with the goal of attaining the
nation’s socio-economic objectives
c. receiving and keeping national funds and managing and controlling the
disturbances thereof.
d. directly implementing the projects of the government.
5. According to the GAM for NGAs, the basis of accounting to be applied by government
entities is the
a. Cash basis
b. Accrual basis
c. Modified accrual basis
d. Any of these as a policy choice
6. Government resources must be utilized efficiently and effectively in accordance with the law.
According to P.D. No. 1445, who is directly responsible in implementing this policy?
a. All employees who are entrusted with the possession of government resources.
b. The head of the government agency.
c. The COA.
d. All elected officials.
7. The transfer of government funds from one officer to another requires the prior authorization
of the
a. Commission on Audit
b. Head of Agency
c. The President of the Republic of the Philippines
d. Bureau of Treasury
8. Mr. A, a government employee entrusted with the custody of government funds, was
instructed by Mr. B, a politician to release funds for the acquisition of a car as a birthday gift
for Mr. B's daughter who will be having her 18th birthday next week. To relieve Mr. A from any
liability, what should Mr. A do?
a. Mr. A shall not release the fund but rather notify Mr. B, in writing, that his
instruction is illegal.
b. Mr. A shall release the fund, and then notify Mr. B, in writing, that his instruction is illegal.
c. Mr. A shall release the fund but retains 20% commission.
d. Mr. A shall release the fund but requires Mr. B to promise, in writing, that the car shall be
returned to the government after his daughter's birthday.
9. Mr. C, a government employee entrusted with the custody of government funds, has lost the
government funds entrusted to him in a force majeure. What should Mr. C do to relieve him
from liability?
a. Mr. C should immediately notify the Head of Agency within 30 days
b. Mr. C should immediately notify COA within 30 days
c. Mr. C should immediately notify Bureau of Treasury within 30 days
d. Mr. C should keep the event a secret and wait for next funds to arrive

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10. These refer to the attributes that make information useful to users.
a. Usefulness characteristics
b. Quantitative characteristics
c. Qualitative characteristics
d. Fundamental principles
11. Information loses this qualitative characteristic if it is not reported on a timely basis.
a. Relevance
b. Reliability
c. Neutrality
d. Materiality
12. Which of the following qualitative characteristics does an entity most likely would need to
make some tradeoffs?
a. Faithful Representation and Substance Over Form
b. Materiality and Relevance
c. Relevance and Reliability
d. Understandability and Comparability
13. An entity recognizes an estimated loss from the decline in value of a property. Which of the
following is most likely the qualitative characteristic being applied by the entity?
a. Reliability
b. Substance over Form
c. Faithful representation
d. Prudence
14. Which of the following is not one of the fund clusters of a government entity?
a. Regular Agency Fund
b. Foreign Assisted Projects Fund
c. Special Account-Locally Funded/Domestic Grants Fund
d. Business Related Funds
e. Petty Cash Fund
15. To achieve a proper balance between relevance and reliability, the overriding consideration
is
a. how users’ needs are best satisfied.
b. relevance is always more important that reliability.
c. reliability is always more important than relevance.
d. greater weight shall be given to relevance compared to reliability.

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PROBLEM 1-3: FOR CLASSROOM DISCUSSION

1. How does government accounting differ from the accounting for business entities?
a. Government accounting places more emphasis on profit-making.
b. Government accounting is very complex that only highly intellectual individuals can
understand it.
c. Government accounting places greater emphasis on sources and utilization of
funds in accordance with the law and management’s stewardship over
government resources entrusted to the entity.
d. Government accounting is specialized in nature that the principles applicable to business
entities are never applicable to government entities.
2. Which of the following is not a source of revenue for the government?

a. Taxes
b. Fees collected by government agencies
c. Grants and donations from other governments
d. Contract price on government contracts awarded to private companies.
3. Entity A (a government agency) is entrusted with government resources. According to P.D.

1445, who is directly responsible for the efficient and effective utilization of these resources?
a. The government employees who have custody over the resources.
b. The Head of Entity A.
c. The COA staff stationed in Entity A.
d. The Foot of Entity A.
4. which of the following is not charged with government accounting responsibility under the
GAM for NGAs?
a. COA
b. DBM
c. NGAs
d. House of Representatives
5. The Department of Budget and Management (DBM) is responsible for

a. promulgating accounting and auditing rules and regulations.
b. the formulation and implementations of the national budget with the goal of
attaining the nation’s socio-economic objectives.
c. receiving and keeping national funds and managing and controlling the disbursements
thereof.
d. directly implementing the projects of the government.
6. Which of the following is not one of the objectives of the GAM for NGAs?
a. to harmonize government accounting standards with international standards.
b. to update the coding structure and accounts.
c. to update accounting books, registries, records, forms, reports and financial statements.
d. to update government accounting standards to be consistent with the provisions
of U.S. GAAP.

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7. All of the following are requirements peculiar to a government entity. Which is not?
a. Presenting budget information in the financial statements.
b. Fund cluster accounting.
c. Incorporating budgetary controls in the financial reporting system.
d. Accrual basis of accounting.
8. Which of the following qualitative characteristics is improved when information is reported on

a timely basis?
a. Relevance
b. Reliability
c. Understandability
d. a and b
9. The best estimate for a loss is P100,000. However, the entity deliberately overstated the
loss to P200,000. Which of the following qualitative characteristics is violated?
a. Prudence
b. Reliability
c. a and b
d. Nothing is violated
10. Which of the following financial statements is peculiar to a government entity?

a. Balance Sheet
b. Statement of Cash Flows
c. Statement of Comparison of Budget and Actual Amounts
d. Statement of Changes in Equity

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CHAPTER 2
False 1. 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.
False 2. 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.
False 3. After the budget call from the DBM, the proposed budget of various agencies
are submitted to the Office of the President for review.
False 4. An entity can incur obligations after receiving notice of its appropriation but
before receiving the allotment.
False 5. Budget deliberations in the Congress start in the House of Senate.
True 6. A government entity must first receive an allotment before it can incur
obligations.
False 7. A government entity can make disbursements even before it receives a
disbursement authority.
False 8. Appropriation is also called obligational authority.
True 9. 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.
True 10. 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.

1. Which of the following does not properly described the budget process used in the
Philippines?
a. Bottom-up budgeting
b. Top-down budgeting
c. Zero-based budgeting
d. Non-incremental budgeting
2. Arrange the following steps according to the sequence that they appear in the budget cycle.
I. Allotment
II. Bicameral Deliberations
III. Budget Accountability Reports
IV. President’s enactment of the GAA
V. Budget hearings with the DBM
a. V, IV, II, I and III
b. V, II, IV, I and III
c. II, V, II, I and III
d. V, I, II, IV and III

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3. Arrange the following steps 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, III and II
c. IV, I, V, II and III
d. IV, V, I, II and III
4. This type of budget is prepared in such a way that estimated revenues exceed estimated
expenditures.
a. Balance budget
b. Excess budget
c. Obligations budget
d. Budget meal
5. This summarized an agency’s fiscal year plans and performance targets. It shows the
agency’s physical and financial plan, monthly cash program, estimate of monthly income,
and list of obligations that are not year due and demandable.
a. Budget Execution Documents (BEDs)
b. Special Allotment Release Order
c. Statement of Approved Budget, Utilizations, Disbursements and Balances
d. Aging of Due and Demandable Obligations
6. It is an authorization issued by the DBM to NGAs to incur obligations. It is also referred to as

Obligational Authority.
a. Appropriation
b. Allotment
c. Budget call
d. Budget hearings
7. It refers to the amount contracted by a duly authorized administrative officer for which the
government is held liable.
a. Appropriation
b. Allotment
c. Obligation
d. Disbursement
8. Which of the following best describes the Notice of Cash Allocation (NCA)?
a. It is a form of legislative authorization in the allocation of funds for specified purposes.
b. It is a form of authorization to a government agency to incur obligations on behalf of the
government.
c. It is a form of authorization to a government agency to make disbursements out of
government funds.
d. It is a notice received from the Congress that cash is allocated for the payment of
planned expenditures.

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9. Disbursements by government entities are most commonly made through

a. MDS Checks
b. Cash
c. Petty Cash Fund
d. Credit Card
10. Responsibility accounting requires all of the following except

a. separate books of accounts to segregate controllable and non-controllable costs
b. identification of responsibility centers
c. distinction between controllable and non-controllable costs
d. coding structure for responsibility centers

Fact pattern:
A legislation approves the allocation of P100B funds to support the operations of Entity A (a
government agency) in the current year. At the start of first quarter, Entity A receives
authorization to incur obligations for a maximum amount of P45B in that quarter. Entity A
extends half of that authorization to its lower operating units. During the quarter, Entity A
receives monthly authorization to disburse funds not to exceed P15B per month. Entity A
extends half of those monthly authorizations to its lower operating units. At the end of the
quarter, total obligations incurred amounted to P40B while total disbursements amounted to
P35B.
1. The allocation of the P100B funds to Entity A is referred to as

a. Allotment
b. Appropriation
c. Obligation
d. Sub-allotment
2. The allocation of the P100B funds to Entity A is authorized by

a. Department of Budget and Management (DBM)
b. Commission on Audit (COA)
c. Bureau of Treasury (BTr)
d. Congress
3. The P45B authorization is referred to as

a. Allotment
b. Appropriation
c. Obligation
d. Sub-allotment
4. The P45B authorization is received by Entity A from

a. DBM
b. COA
c. BTr
d. Congress

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5. The half of the P45B authorization extended by Entity A (Central Office) to its lower
operating units is referred to as
a. Allotment
b. Appropriation
c. Obligation
d. Sub-allotment
6. Which of the following best describes the P15B monthly authorizations?

a. Allotment
b. Obligation authority (e.g., Notice of Cash Allocation ‘NCA’)
c. Disbursement authority (e.g., Notice of Cash Allocation ‘NCA’)
d. Disbursement authority (e.g., Notice of Transfer of Allocation ‘NTA’)
7. The P15B monthly authorizations are received by Entity A from

a. DBM
b. COA
c. BTr
d. Congress
8. The half of the P15B monthly authorizations extended by Entity A (Central Office) to its lower
operating units is referred to as
a. Cash Disbursement Ceiling
b. Non-Cash Availment Authority
c. Notice of Cash Allocation (NCA)
d. Notice of Transfer of Allocation (NTA)
9. In Entity A’s first quarter Statement of Appropriations, Allotments, Obligations,

Disbursements and Balances, how much is shown as “unreleased appropriations?”
a. P65B
b. P60B
c. P55B
d. P45B

Disbursements and Balances, how much is shown as “unobligated allotments?”
a. P6B
b. P5B
c. P10B
d. P15B

Disbursements and Balances, how much is shown as “unpaid obligations?”
a. P6B
b. P5B
c. P10B
d. P15B

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1. All disbursements of government entities must be in conformance with the law and the
a. National budget
b. COA audit findings
c. PPSASs
d. PFRSs
2. An entity prepares its budget for the upcoming year from scratch. It scrutinizes each item in
the budget irrespective of whether the item was included in the previous budget. This
process is called
a. zero budgeting
b. incremental budgeting
c. scratch budgeting
d. zero-based budgeting
3. Under this approach to budgeting, several parties participate in the budget preparation –
from the lowest levels of government to the highest levels, and sometimes even citizen-
stakeholders participate in the budget preparation.
a. bottoms-up budgeting
b. zero-based budgeting
c. top-down budgeting
d. bottom-up budgeting
4. What is the correct sequence of the following steps in the budget process?
I. Budget Legislation
II. Budget Accountability
III. Budget Preparation
IV. Budget Execution
a. II, III, I and IV
b. III, I, IV and II
c. III, I, II and IV
d. III, IV, I and II
5. After deliberation in both houses in the Congress are finished, a committee is formed to
harmonize any conflicts between the Representatives and Senate versions of the General
Appropriations Bill. This committee is called the
a. Adjudication Conference Committee
b. Bicaramel Conference Committee
c. Referee Conference Committee
d. Bicameral Conference Committee
6. It is the authorization made by a legislative body to allocate funds for purposes specified by
the legislative or similar authority.
a. Appropriation
b. Allotment
c. Obligation
d. Disbursement

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7. These are the authorizations programmed annually or for some other period prescribed by
law, by virtue of outstanding legislation which does not require periodic action by Congress.
a. Automatic Appropriations
b. New General Appropriations
c. Continuing Appropriations
d. Supplemental Appropriations
8. Entity A, a government entity, wants to make disbursements. Arrange the following events in
the correct sequence before Entity A can make valid disbursements.
I. Allotment
II. Disbursement Authority
III. Appropriation
IV. Incurrence of obligation
a. II, III, I, and IV
b. III, I, IV, and II
c. III, I, II, and IV
d. III, IV, I, and II
9. This is necessary before government entities can enter into contracts that bind the
government for the eventual disbursement of government funds.
a. Disbursement authority
b. Notice of cash allocation
c. Allotment
d. Incurrence of obligation
10. Under responsibility accounting, a manager’s performance is evaluated

a. based on all resources under his custody.
b. only in terms of the costs, or other variables, that he controls.
c. on the basis of both controllable and non-controllable costs.
d. only at year-end.

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CHAPTER 3
True 1. Technically, only the Journals and Ledgers are considered accounting records;
the Registries are budget records.
True 2. Separate accounting records and budget registries are maintained for each
fund cluster.
False 3. Government entities and business entities use the term "obligation" or the
phrase "incurrence of obligation" similarly.
True 4. 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.
True 5. A check disbursement is normally recorded as credit to the "Cash-Modified
Disbursement System (MDS) Regular" account.
True 6. 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.
True 7. At the end of each year, an adjustment is made to revert any unused NCA of a
government entity.
False 8. The GAM for NGAs requires the Collecting Officer to issue an official receipt to
acknowledge the receipt of the Notice of Cash Allocation.
True 9. 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.
False 10. The remittance of amounts withheld to other government agencies, such as the
BIR, BOC, GSIS, PhilHealth, and Pag-IBIG, is done through the TRA.

1. The various registries maintained by government entities are considered, technically, as
a. Book of Accounts
b. Budget Records
c. General Ledgers
d. Log books
2. Which of the following is recorded in the Obligation Request and Status (ORS)?
a. Receipt of notice of appropriation
b. Receipt of allotment from DBM
c. Receipt of Notice of Cash Allocation from the DBM
d. Entering into employment contracts with employees
3. This type of expenditure pertains to all types of employee benefits.

a. Personal Services (PS)
b. Maintenance and Other Operating Expenses (MOOE)
c. Financial Expenses (FE)
d. Capital Outlays (CO)

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4. Entity A, a government entity, made disbursements for the travelling expenses of its
personnel. These expenditures are most likely classified as
5. Which of the following is charged with the responsibility of keeping the general accounts and
related documents of the government
a. Commission on Audit (COA)
b. Bureau of Treasury (BTr)
c. National Government Agencies (NGAs)
d. Department of Budget and Management (DBM)
6. A journal entry with a credit to the "Cash-Modified Disbursement System, Regular" account
will most likely be recorded in the
a. General Journal
b. Special Journal
c. Cash Disbursements Journal
d. Check Disbursements Journal
7. Which of the following accounts is debited when a government entity remits its collections to
the National Treasury?
a. Cash-Tax Remittance Advice
b. Cash-Modified Disbursement System (MDS), Regular
c. Cash-Treasury/Agency Deposit, Regular
d. Cash – Collecting Officer
8. Which of the following accounts is credited when a government entity remits taxes withheld
to the BIR?
9. Which of the following accounts is credited when a government entity remits contributions to
the GSIS, PhilHealth and Pag-IBIG?
10. Obligations recorded in the registries but not yet in the accounting books are referred to as
a. Not Yet Due and Demandable
b. Contingent liabilities
c. Erroneous recording
d. Unpaid obligations

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1. The receipt of an appropriation is recorded by a government entity in the
a. RAOD
b. ORS
c. RAPAL
d. a and c
2. The incurrence of an obligation for future delivery of performance by the obligee is recorded
by a government entity in the
a. RAOD
b. ORS
c. RAPAL
d. a and b
3. The receipt of an appropriation is recorded by a government entity in the

a. RAOD
b. ORS
c. RAPAL
d. a and b
4. 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
form National Government
c. (Debit) Cash-Collecting Officer; (Credit) Subsidy from National Government
d. No journal entry. The event is recorded only in the Registries.
5. According to the Revised Chart of Accounts (RCA) issued by the COA, the “Subsidy from
National Government” account is a(an)
a. Asset account
b. Liability account
c. Revenue account
d. Equity account
6. Which of the following is not one of the necessary closing entries of a government entity?
a. Closing of the “Cash-Treasury/Agency Deposit, Regular” account to the “Accumulated
Surplus/(Deficit)” account.
b. Closing of the “Subsidy from National Government” account to the “Revenue and
Expense Summary” account.
c. Closing of income and expense accounts to the “Revenue and Expense Summary”
account.
d. Closing of the net balance of “Revenue and Expense Summary” account to the
“Subsidy from National Government” account.

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7. A government entity pays an accounts payable. The entry to record the payment will most
likely include a
a. debit to the “Cash-Modified Disbursement System (MDS), Regular” account.
b. credit to the “Due to BIR” account.
c. credit to the “Cash-Treasury/Agency Deposit, Regular” account.
d. None of these. The event is recorded only in the Registries and the Obligation Request
and Status.
8. In accordance with the GAM for NGAs and the Revised Chart of Accounts, how does a
government entity recognize the uncollectibility of accounts receivable?
a. By debiting the “Bad Debts Expense” account.
b. By debiting the “Impairment Loss-Loans and Receivables” account.
c. By debiting the “Allowance for Impairment-Accounts Receivable” account.
d. b and c
9. The “Subsidy from National Government” account is credited when recording a

a. receipt of NCA
b. reversion of unused NCA
c. constructive remittance of customs duties or taxes withheld through TRA
d. a and c
10. Expenditures to acquire long-term assets are most likely classified as


1. This is used to recognize the constructive remittance of taxes withheld to the BIR or
customs duties withheld to the BOC.
a. Tax Remittance Advice (TRA)
b. Notice of Tax Allocation (NTA)
c. Tax and Customs Remittance Advice (TCRA)
d. Notice of Tax Remittance Advisory (NTRA)
2. 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.

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3. Entity A received Notice of Cash Allocation (NCA) amounting to P625,000 for the year.
Unused NCA at the end of the period amount to P6,000. Entity A remitted taxes withheld to
the BIR amounting to P48,000 through Tax Remittance Advice (TRA). How much is the “Net
Financial Assistance/Subsidy” to be reported in Entity A’s statement of financial
performance?
a. 667,000
b. 619,000
c. 571,000
d. 0
Computation:
Subsidy form NG (NCA) 625,000
Subsidy from NG (TRA) 48,000
Unused NCA (6,000)
667,000
4. Entity A, a government entity, had the following transactions during the period:
 Received Notice of Cash Allocation (NCA) amounting to P750,000.
 Earned total revenue of P290,000 from billings and collections of unbilled income.
 Incurred total expenses of P885,000.
 Remitted total taxes withheld of P140,000 to the BIR through Tax Remittance Advice
(TRA).
 The “Cash-Modified Disbursement System (MDS), Regular” has an unused balance of
P43,000 at the end of the period.
How much is the surplus (deficit) for the period?

a. (595,000)
b. 155,000
c. 252,000
d. 112,000
Computation:
Revenue 290,000
Expenses (885,000)
Surplus (deficit) from operations (595,000)
Subsidy from NG (NCA) 750,000
Subsidy from NG (TRA) 140,000
Unused NCA (43,000)
Net Financial Assistance/Subsidy 847,000
Surplus (Deficit) for the period 252,000

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5. The trial balances of Entity A, a government entity, show the following amounts:
 Unadjusted Trial Balance – P2,753,000
 Adjusted Trial Balance – P2,765,000
 Statement of Financial Position (Debit Column) – P1,880,000
 Statement of Financial Performance (Credit) – P1,137,000
How much is the surplus (deficit) for the period?

a. 252,000
b. 885,000
c. (252,000)
d. (743,000)
Computation:
Adjusted Trial Balance (Dr. & Cr.) 2,765,000
Statement of Financial Position (Dr.) (1,880,000)
Statement of Financial Performance (Dr.) 885,000
Statement of Financial Position (Cr.) 1,137,000
Surplus (Deficit) for the period 252,000
6. Which of the following expenditures is not shown in the statement of financial performance?
a. Personnel Services (PS)
c. Capital Outlay (CO)
d. Financial Expenses (FE)
e. All of these expenditures are shown in the statement of financial performance.
7. The entries to record the constructive remittance of taxes withheld through Tax Remittance
Advice include all of the following, except
a. A debit to the “Cash-Tax Remittance Advice” account
b. A credit to the “Cash-Tax Remittance Advice” account
c. A debit to the “Subsidy from National Government” account
d. A debit to the “Due to BIR” account
e. All of these are included.
8. 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
9. 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
10. The 8-digit Revised Chart of Accounts (RCA) Code for expenses starts with number
a. 1 c. 5
b. 2 d. None of these

lOMoARcPSD|9470613
CHAPTER 4
False 1. All revenues shall be remitted to the BTr and included in the Special Fund,
unless another law specifically requires otherwise.
False 2. Payments to government entities in the form of checks are not allowed.
False 3. Revenues of a government entity arise from exchange transactions only.
False 4. According to the GAM for NGAs, revenue from exchange transactions are
measured at the amount of cash received.
True 5. When cash flows are deferred, the fair value of the consideration receivable is
its present value.
True 6. The constructive remittance of taxes withheld through the TRA gives rise to the
recognition of revenue.
True 7. According to the GAM for NGAs, the receipt of concessionary loans by
government entities may give rise to revenue recognition.
False 8. The taxable event for income tax is the passage of the time period for which the
tax is levied.
False 9. Taxes are compulsory payments, imposed on persons, properties or activities,
intended to provide revenue to the government. Taxes include fees, fines and
penalties.
True 10. The main source of revenue for the government is taxes.

1. Which of the following is a non-exchange transaction?
a. Leasing
b. Collection of taxes
c. Rendering of legal services
d. Collection of tuition fees
2. 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 PPSAS, how should the revenue from the contract be recognize?
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.
3. 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.
4. The taxable event for value added tax (VAT) is the

a. undertaking of a taxable activity.
b. earning of taxable income.
c. movement of dutiable goods or services across the customs boundary.
d. any of these

lOMoARcPSD|9470613
5. 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.
6. A type of fund held by a government entity that is designated for special purposes.
a. General fund
b. Special fund
c. Trust fund
d. Fiduciary fund
7. The national government receives a foreign grant conditioned on the construction of a public
infrastructure. According to the GAM for NGAs, when does the national government
recognize revenue from the grant (i.e., credit to the Income from Grants and Donations in
Cash’ account)?
a. Upon the receipt of the grant.
b. When the grant becomes receivable, provided there is reasonable assurance that the
attached condition will be satisfied.
c. When the condition is met.
d. When the related expenses for which the grant is intended to compensate are incurred.
8. The receipt of which of the following may not give rise to revenue by a government entity?
a. Notice of Cash Allocation
b. Tax Remittance Advice
c. Subsidy from another government entity
d. Inter-agency fund transfer
9. A government entity collects fees for the processing of certain permits. The processing of a
permit would normally take a few minutes. The processing fee is collected upon issuance of
the permit. This government entity would normally recognize revenue from permit fees
a. on a straight line basis.
b. by reference to the stage of completion.
c. upon collection of the fee.
d. when the significant risks and rewards are transferred to the customer.
10. The receipt of a performance bond or a security deposit is credited to a

a. liability account
b. revenue account
c. cash account
d. a and c

lOMoARcPSD|9470613

1. Which of the following is not one of the fundamental principles for revenue under P.D. No.
1445?
a. All revenues shall be remitted to the BTr and included in the General Fund, unless
another law specifically allows otherwise.
b. Recording of revenue in other types of funds (e.g., Special Fund) shall be made only
when authorized by law.
c. Collections of revenue must be properly acknowledged through pre-numbered Official
Receipts.
d. All collections of revenue must be in the form of cash. Checks are not acceptable.
2. Imposition and collection of tax revenue is considered

a. exchange transaction
b. non-exchange transaction
c. donation
d. any of these
3. According to the GAM for NGAs, all of the following criteria must be met before a
government entity recognizes revenue from sale of goods, except
a. Significant risks and rewards of ownership of the goods are transferred to the buyer and
the entity does not retain control over those goods.
b. It is probable that economic benefits will flow to the entity.
c. The amounts of revenue and related costs can be measured reliably.
d. The stage of completion can be measured reliably.
4. According to the GAM for NGAs, when the outcome of a service contract cannot be
estimated reliably, revenue is recognized
a. on a straight line basis over the periods the services are rendered.
b. by reference to the contract’s stage of completion at each reporting date.
c. only to the extent of costs that are expected to be recovered.
d. only upon the completion of the contract.
5. Entity A sells goods with a list price of P100,000, on account. Credit term is 20% and 10%.
Journal entry to recognize the revenue includes all of the following except
a. A debit to accounts receivable for P72,000.
b. A credit to sales revenue for P72,000.
c. A debit to sales discounts for P28,000.
d. All of these are included in the entry.
6. According to the GAM for NGAs, an exchange of goods or services of similar nature and
value between entities
a. gives rise to revenue measured at the fair value of the goods or services received,
adjusted for any cash paid or received on the exchange.
b. gives rise to revenue measured at the fair value of the goods or services given up,
adjusted for any cash paid or received on the exchange.
c. a or b, whichever is more clearly determinable.
d. does not give rise to revenue.

lOMoARcPSD|9470613
7. Gifts, donations and goods in-kind with condition are recognized

a. as revenue immediately upon the receipt thereof.
b. initially as liability and recognized as revenue only when the condition is satisfied.
c. as revenue measured at fair value only when actually received.
d. directly in equity.
8. Which of the following, according to GAM for NGAs, may never give rise to revenue for a
government entity?
a. Services in-kind
b. Debt forgiveness
c. Concessionary loan
d. Grant with condition
9. When an amount already recognized as revenue become subsequently uncollectible, it is

a. Recognized as expense.
b. Recognized as an adjustment to the revenue originally recognized.
c. Either a or b as an accounting policy choice
d. Not recognized
10. Which of the following receipts of a government entity will give rise to revenue recognition?
a. Receipt of excess cash advance
b. Receipt of refund for overpayment of expenses
c. Receipt of performance bond
d. Receipt of subsidy from the National Government or other National Government
Agencies

lOMoARcPSD|9470613
CHAPTER 5
True 1. No additional cash advance shall be given to any official or employee unless
the previous cash advance given to him is first liquidated.
True 2. All disbursements require prior certificates to establish their validity and legality.
A certification for fictitious obligation is void and results to criminal liability be
the certifying officials.
False 3. 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 call Cash
Disbursement Ceiling (CDC).
False 4. All disbursements shall be made through Disbursement Vouchers (DVs) or
Payroll which are approved by the Head of the Requisitioning Unit.
False 5. Government entities are not allowed by law to make purchases using credit
card.
False 6. The Non-Cash Availment Authority (NCAA) is a disbursement authority issued
to government agencies with foreign service posts.
False 7. 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.
False 8. Disbursements through the Cash Disbursement Ceiling (CDC) results to the
recognition of a loan payable in the books of accounts of the BTr.
True 9. 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 fund/bank transfers.
False 10. The only valid modes of disbursement for a government entity are through cash
or check.

1. A certification on the availability of allotment is required before a disbursement of
government funds is made. According to the GAM for NGAs, who shall issue this
certification?
a. Budget Officer
b. Chief Accountant
c. Head of Agency
d. Requisitioning Individual
2. The Chief Accountant shall charge obligations incurred against available allotment to ensure
that
a. the NCA is sufficient to meet the disbursement needs.
b. there are no unreleased appropriations.
c. no overdraft is incurred.
d. no excess allotment exists.

lOMoARcPSD|9470613
3. A certification on the availability of funds and completeness of supporting documents is

required before a disbursement of government funds is made. According to GAM for NGAs,
who shall issue this certification?
a. Budget Officer
b. Chief Accountant
c. Head of Agency
d. Requisitioning Individual
4. Which of the following results to the recognition, in the books of accounts, of expenses
classified as Personnel Services?
a. Granting of cash advance for payroll
b. Liquidation of payroll fund
c. Issuance of office supplies to end users
d. Set up of payable for payroll
5. According to the GAM for NGAs, disbursements for salaries and wages shall be supported
by
a. Disbursement Vouchers
b. Payroll
c. Petty Cash Vouchers
d. Official Receipts
6. Which of the following results to the recognition of expense?

a. Granting of cash advance for travel
b. Liquidation of cash advance for travel
c. Refund of excess cash advance
d. Remittance of the refund for excess cash advance to the BTr.
7. The entry in the books of a government agency with foreign service post to record the
receipt of disbursement authority called the Cash Disbursement Ceiling (CDC) includes a
a. debit to Cash-Modified Disbursement System (MDS)
b. credit to Subsidy from National Government
c. credit to Cash-Constructive Income Remittance
d. debit to Subsidy from National Government
8. This is used to recognized: (1) in the books of national government agencies, the
constructive remittance to BIR and BOC of taxes and customs’ duties withheld, and the
constructive receipt of NCA for those taxes and customs duties; (2) in the books of the BIR
and BOC, the constructive receipt of tax revenue and customs duties; and (3) in the books
of the BTr, the constructive receipt of the taxes and customs duties remitted.
a. Notice of Cash Allocation (NCA)
b. Tax Remittance Advice (TRA)
c. Cash Disbursement Ceiling (CDC)
d. Non-Cash Availment Authority (NCAA)

lOMoARcPSD|9470613
9. All of the following are considered valid cashless disbursements, except

a. purchase of goods using an electronic card issued by CitiBank.
b. payment of payables using a Non-Cash Availment Authority.
c. remittance of taxes withheld to the BIR through Tax Remittance Advice.
d. online payment through LBP’s eMDS.
e. payment to supplier through LBC Padala.
10. Which of the following government agencies will most likely be able to obtain a
disbursement authority in the form of Cash Disbursement Ceiling (CDC)?
a. BIR
b. DPWH
c. DFA
d. NFA

1. Entity A disburses a check chargeable against the Treasury Account. The journal entry to
record the disbursement involves a credit to which of the following accounts?
a. Cash-Treasury/Agency Deposit, Regular
c. Cash-in-Bank-Local Currency, Current Account
d. Cash-Collecting Officers
2. Entity A sends an employee to an official travel and gives him cash to cover his travelling
expenses. Which of the following is most likely the entry to record the cash disbursement?
a. Travelling Expenses xxx
Advances to Officers and Employees xxx
b. Travelling Expenses xxx
Cash-Modified Disbursement System (MDS), Regular xxx
c. Advances to Officers and Employees xxx
d. Advances to Officers and Employees xxx
Cash on Hand xxx
3. Entity A purchases office supplies from an authorized merchant using an electronic card.
The entry to record the purchase is
a. Office Supplies Inventory xxx
Accounts Payable xxx
b. Accounts Payable xxx
Cash – Modified Disbursement System (MDS), Regular xxx
c. Office Supplies Inventory xxx
d. No journal entry.

lOMoARcPSD|9470613
4. Entity A wants to make disbursements online. Which of the following should Entity A do so
that it can make valid disbursements online?
a. Apply for a PayPal account.
b. Obtain a debit card or credit card that is either Visa or MasterCard from any bank.
c. Enrol with the eMDS of the Land Bank of the Philippines.
d. Make a facebook account.
5. Entity A acquires the equipment on account and settles the account through Non-Cash
Availment Authority (NCAA). The entry to settle the account is
a. Accounts Payable xxx
Subsidy form National Government xxx
c. Accounts Payable xxx
Cash-Constructive Income Remittance xxx
6. Entity A has a foreign service post. During the period, Entity A receives authorization from
the DBM allowing it to use the collections of its own foreign service post to defray for the
necessary expenses of the foreign service post. The entry to record the disbursement
authority is
a. Cash in Bank-Foreign Currency, Current Account xxx
Cash-Collecting Officer xxx
b. Cash-Constructive Income Remittance xxx
Subsidy from NG xxx
Cash-Constructive Income Remittance xxx
7. Which of the following modes of disbursements is most similar to a check disbursement?

a. eMDS
b. NCAA
c. ADA
d. NBA
8. A government entity makes payment through Advice to Debit Account (ADA). The entry most
likely to be used in recording the payment is
a. Accounts Payable xxx
Cash-ADA xxx
d. None. The transaction is recorded only in the Registries and ORS.

lOMoARcPSD|9470613
9. A government entity makes constructive remittance of taxes withheld to the BIR through Tax
Remittance Advice (TRA). The entry used in recording the transaction is
a. Cash-Tax Remittance Advice xxx
b. Due to BIR xxx
Cash-Tax Remittance Advice xxx
c. a and b
d. None. The transaction is recorded only in the Registries and ORS.
10. Which of the following modes of disbursements would result to the recognition of a loan
payable in the books of the BTr?
a. CDC
b. NCAA
c. ADA
d. UFC

1. Which of the following is not used in processing disbursements?
a. DVs
b. Payroll
c. PCVs
d. ORs
2. Which of the following is not a form of disbursement authority?

a. NCA
b. TRA
c. NTA
d. Allotment
3. It is an authority issued by the DBM to central, regional and provincial offices and operating
units to cover their cash requirements. It specifies the maximum amount of cash that can be
withdrawn from a government servicing bank in a certain period.
a. Notice of Cash Allocation (NCA)
b. Tax Remittance Advice (TRA)
c. Cash Disbursement Ceiling (CDC)
d. Non-Cash Availment Authority (NCAA)

lOMoARcPSD|9470613
4. Entity A has a foreign service post. During the period, Entity A receives authorization from
the DBM allowing it to use the collections of its own foreign service post to defray for the
necessary expenses of the foreign service post. This authorization is called
a. Cash Disbursement Ceiling (CDC)
b. Non-Cash Availment Authority (NCAA)
c. Electronic Modified Disbursement System (eMDS)
d. Advice to Debit Account (ADA)
5. Entity A disburses a check chargeable against its checking account maintained with
Government Servicing Bank. The journal entry to record the disbursement involves a credit
to which of the following accounts?
a. Cash-Treasury/Agency Deposit, Regular
c. Cash-in-Bank-Local Currency, Current Account
d. Cash-Collecting Officers
6. Which of the following entries would most likely constitute a cash disbursement, rather than
a check disbursement?
a. Electricity Expenses xxx
To record payment for electricity expenses
To record payment of accounts payable
To record grant of cash advance for travel
d. None. All of these are check disbursements.
7. Which of the following would most likely constitute a disbursement through Advice to Debit
Account (ADA)?
a. Electricity Expenses xxx
To record payment for electricity expenses
To record payment of accounts payable
To record grant of cash advance for travel
d. None. All of these are check disbursements.

lOMoARcPSD|9470613
8. Which of the following is true regarding disbursements through electronic Modified

Disbursement System (eMDS)?
a. The disbursement is not recorded in the books of accounts.
b. The disbursement is made through the issuance of MDS check.
c. The disbursement is made through the use of a credit card that is swiped in a card swipe
machine of an authorized merchant.
d. The disbursement is made through an online transaction.
9. Entity A purchases office supplies from an authorized merchant using an electronic card.
The entry to record the purchase is
a. Office Supplies Inventory xxx
c. Office Supplies Inventory xxx
10. Entity A acquires the equipment on account and settles the account by debiting Accounts
Payable and crediting Subsidy from National Government. The mode of disbursement used
by Entity A is most likely a(an)
a. Credit Card transaction
b. Advice to Debit Account
c. Cash Disbursement Ceiling
d. Non-Cash Availment Authority

lOMoARcPSD|9470613
CHAPTER 6
False 1. According to the GAM for NGAs, all financial assets are initially measured at
fair value.
False 2. According to the GAM for NGAs, government entities shall prepare bank
reconciliations only at year-end or whenever the need arises.
False 3. Only debt instruments with remaining maturity of 3 months or less can qualify
as cash equivalents.
False 4. The PCF of a government entity is replenished when disbursements reach at
least 90%, or as needed.
True 5. No journal entry is prepared when a disbursement is made out of the petty cash
fund.
False 6. A government entity established a P30,000 petty cash fund. The custodian
must be bonded for at least P5,000.
False 7. According to the GAM for NGAs, all financial assets shall be initially measured
at fair value plus transaction costs.
False 8. Transaction costs on financial assets classified under the held to maturity
category are expensed outright.
True 9. A derivative derives its value from the changes in value of a specified rate,
price, event or some other variable.
True 10. Risk management is the process of identifying the desired level of risk,
identifying the actual level of risk and altering the latter to equal the former.

1. Which of the following is not considered a financial asset?
a. Petty cash fund
b. Investment in debt securities
c. Accounts receivable
d. Prepaid assets
2. A cash shortage of a government entity is most likely recorded as a

a. debit to a receivable account
b. debit to a cash shortage or overage account
c. credit to miscellaneous income account
d. credit to a cash shortage or overage account
3. Dishonored checks are recorded by a government entity as

a. Notes receivable
b. Other receivables
c. Accounts receivable
d. Losses

lOMoARcPSD|9470613
4. The entry to record the replenishment of a petty cash fund of a government entity is
a. Expense accounts xxx
b. Expense accounts xxx
Petty Cash xxx
c. Expense accounts xxx
Cash-Collecting Officers xxx
d. Expense accounts xxx
Cash-Treasury/Agency Deposit, Regular xxx
5. Under this method of bank reconciliation statement preparation, the unadjusted book and
bank balances are brought to an adjusted balance that is reported on the statement of
financial position.
a. Bank to Book Method
b. Book to Bank Method
c. Adjusted Balance Method
d. All of these
6. Which of the following may be paid through the petty cash fund of a government entity?
a. Rent worth P12,000.
b. Pantry supplies worth P15,000.
c. Office supplies worth P20,000.
d. None of these.
7. Entity A maintains a petty cash fund. At any given point of time, the cash on hand and the
petty cash vouchers must be equal to the ledger balance of the petty cash fund. If these are
not equal, the difference is either shortage or overage. This system of handling petty cash
fund is called
a. Impress System
b. Fluctuating Balance System
c. Pretty Cash System
d. Imprest System
8. According to the GAM for NGAs, the establishment of a petty cash fund
a. requires the approval of the Head of Agency.
b. requires the approval of the Chief Accountant.
c. requires the approval of the President of the Philippines.
d. does not require any formal approval because petty cash funds are likely to be
immaterial.

lOMoARcPSD|9470613
9. The “Loans Receivable” account is most likely to be used in the books of accounts of which
the following government agencies?
a. COA
b. NIA
c. BTr
d. All of these
10. Which of the following is not one of the characteristics of a derivative?

a. It requires no notional amount (or only a very minimal notional amount).
b. Its value changes in response to the change in an underlying.
c. It requires no initial net investment (or only a very minimal initial net investment).
d. It is settled at a future date.

1. According to the GAM for NGAs, these refer to incremental costs that are directly
attributable to the acquisition, issue, or disposal of a financial instrument.
a. Costs to sell
b. Transaction costs
c. Financial costs
d. Variable costs
2. Which of the following is not one of the categories of financial assets under the GAM for
NGAs?
a. Held-to-maturity investments
b. Loans and receivables
c. Available-for-sale financial assets
d. Financial asset through other comprehensive income
3. Entity A acquires an investment for P1,000,000. Transaction costs amount to P10,000. At

year-end, the investment has a fair value of P900,000. If the investment is classified as
financial asset through surplus or deficit, how much is the loss from the change in fair value?
a. 100,000
b. 90,000
c. 110,000
d. 0

lOMoARcPSD|9470613
Use the following information for the next four questions

On January 1, 20x1, Entity A acquires 10-year, 10%, P2,000,000 face amount bonds for
P1,456,792 and classifies them as held-to-maturity investments. Transaction costs on the
acquisition amount to P125,919. The issuer pays annual interest every December 31. The
effective interest rate is 14%
4. The initial carrying amount of the investment on January 1, 20x1 is

a. 1,456,792
b. 1,330,873
c. 1,582,711 (1,456,792 + 125,919)
d. 2,000,000
5. The interest income in 20x1 is

a. 221,580 (1,582,711 x 14%)
b. 203,951
c. 186,322
d. 200,000
6. If the investment is classified as available for sale financial asset and the fair value at year-
end is P1,800,000, how much is the gain (loss) from the change in fair value?
a. (200,000)
b. (217,289)
c. 195,709 (1,800,000 – 1604,291)
d. 238,869
Date Collections Interest income Amortization Present value

1/1/x1 1,582,711
12/31/x1 200,000 221,580 21,580 1,604,291
7. If the investment is classified as available for sale financial asset, how much is the interest
income in 20x1?
a. 221,580
b. 203,951
c. 186,322
d. 200,000
8. According to the GAM for NGAs, changes in fair value of investments classified as available
for sale financial assets are
a. recognized in surplus or deficit
b. recognized in net assets
c. not recognized
d. a or b

lOMoARcPSD|9470613
9. Entity A acquires an investment for P100,000 and incurs transaction costs of P10,000. At
year-end, the fair value of the investment is P80,000. Entity A recognizes a P30,000 loss
from the change in fair value. The investment would most likely to have been classified
under which of the following categories of financial assets?
a. Available-for-sale financial assets
b. Financial asset through surplus or deficit
c. Held-to-maturity investments
d. Loans and receivables
10. Entity A acquires an investment for P100,000 and incurs transaction costs of P10,000. At
year-end, the fair value of the investment is P120,000. However, the investment is
appropriately reported in the year-end statement of financial position at a carrying amount of
P106,382. The investment would most likely to have been classified under which of the
following categories of financial assets?
a. Available-for-sale financial assets
b. Held-to-maturity investments
c. Loans and receivables
d. Cannot be determined due to insufficient information

1. According to the GAM for NGAs, a government entity’s cash comprises all of the following
except
a. cash on hand
b. cash in bank
c. cash equivalents
d. cash treasury accounts
2. Which of the following is excluded from the amount of cash that is reported in the statement
of financial position of a government entity?
a. unreleased checks drawn
b. cancelled checks drawn
c. undeposited collections
d. post-dated checks received
3. An unexplained cash overage of a government entity is recorded as a

a. credit to a payable account
b. debit to a cash shortage overage account
c. credit to miscellaneous income account
d. credo to a cash shortage or overage account

lOMoARcPSD|9470613
4. All of the following are considered internal controls over cash except
a. Requiring a cash custodian to be properly bonded. The amount of bond shall not be less
than the cash accountability of the custodian.
b. Preparing a bank reconciliation for each bank account maintained by a government
entity.
c. Making estimates of recurring expenses before establishing an amount for a petty cash
fund.
d. Maintaining the petty cash fund under a Fluctuating Balance System wherein the
total cash on hand and petty cash vouchers may or may not be equal to a fixed
amount of petty cash fund at any given point of time.
e. Requiring at least three bidders or canvases before making purchases.
5. The per transaction threshold for petty cash disbursements of a government entity is
a. P5,000
b. P10,000
c. P15,000
d. No limit; sky is the limit.
6. A government agency shall prepare a bank reconciliation for each bank account maintained.
Bank reconciliations are prepared using the
a. Bank to Book Method
b. Book to Bank Method
c. Adjusted Balance Method
d. Any of these
7. If the adjusted balance of cash is less than the unadjusted balance per books and there are
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
8. According to the GAM for NGAs, receivables are measured at

Initial Subsequent
a. Fair value Amortized cost
b. Fair value plus transaction costs Amortized cost
c. Fair value minus transaction costs Amortized cost
d. Fair value Fair value
9. The subsequent changes in the fair value of an investment that is classified as available for
sale are recognized in
a. surplus or deficit
b. net assets or equity
c. not recognized
d. any of these as an accounting policy choice

lOMoARcPSD|9470613
10. According to the GAM for NGAs, the very purpose of derivatives is
a. risk management
b. speculation
c. risk incurrence
d. a or b

lOMoARcPSD|9470613
CHAPTER 7
False 1. According to the GAM for NGAs, inventories of government entities are
subsequently measured at net realizable value or current replacement cost
depending on whether the inventory is classified as held for sale or held for
distribution.
False 2. According to the GAM for NGAs, purchases of machinery, equipment, furniture
and fixtures and similar items below the Ᵽ10,000 capitalization threshold for
PPE are recorded as inventories.
True 3. Relief goods, office supplies, equipment and furniture and fixture are items that
may appropriately be recorded as inventories by a government entity.
False 4. The GAM for NGAs allows government entities to use the FIFO cost flow
formula.
False 5. The GAM for NGAs allows government entities to use a periodic inventory
system.
False 6. The specific identification cost formula is not available for use by government
entities, according to the GAM for NGAs.
False 7. The Purchase Request (PR) form is prepared when end users request for the
issuance of items of inventory that are available on stock.
True 8. If the beginning balance of inventory is P50, the net purchases are P100 and
the cost of goods sold is P30, the ending inventory must be P120.
Fact pattern
Entity A, a government entity, sells eggs. At the start of the period, Entity A’s inventory consisted
of (1) red egg with a carrying amount of P2. During the period, Entity A acquired one (1) brown
egg for P3 and one (1) blue egg for P4. Entity A sold the brown egg during the period.
False 9. Under the Specific identification cost formula, Entity A’s cost of sale is P2.
False 10. If the eggs are ordinarily interchangeable, Entity A’s cost of sale is P2.5,
assuming the sale occurred only after all the purchases were made.

1. Entity A, a government entity, purchases inventories. To record a purchase, Entity A would
likely debit the (an).
a. Inventory account
b. Purchases Account
c. Expense Account
d. a or b
2. Entity A, a government hospital, acquires medicines to be sold in its pharmacy. Entity A

would record the medicines acquired as
a. Semi-Expendable Property
b. Inventory Held for Consumption
c. Inventory Held for Distribution
d. Inventory Held for Sale

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3. Entity A, a government entity, purchases relief goods which are to be held on standby, ready
to be distributed when a calamity strikes. Entity A would most likely classify the goods
purchased as
a. Inventory Held for Consumption
b. Inventory Held for Distribution
c. Purchases
d. None of these, only a note disclosure shall be made
4. According to the GAM for NGAs, this shall be used for large numbers of items of inventory
that are ordinarily interchangeable.
a. Specific identification
b. FIFO
c. Weighted average cost applied in a period inventory system
d. Weighted average cost applied in a perpetual inventory system
e. Any of these as a matter of accounting policy choice
5. This refers to the cost an entity would incur to acquire an asset on the reporting date.
a. Net realizable value
b. Fair value
c. Current replacement cost
d. Present value
6. Which of the following inventories of a government entity would be subsequently measured

at the lower of cost and current replacement cost?
a. Inventories of rice that are held for sale
b. Medicines being sold by a government-owned pharmacy
c. Books to be distributed to students in public schools
d. Forest products held for sale
7. Which of the following events or transactions would not lead to the recognition of the cost of
inventory as expense?
a. The inventory is written down.
b. The inventory is distributed for free.
c. The inventory is exchanged for dissimilar inventory.
d. The inventory is consumed in the manufacturing process.
8. The accounting division of a government entity uses this record and monitor the movements
and balances inventories.
a. Stock Card
b. Stock Ledger Card
c. Journal Entry
d. Special Journal

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9. Which of the following statements correctly differentiates the Stock Card from the Stock
Ledger Card?
a. The Stock Ledger Card is maintained by the Budget Division while the Stock Card is
maintained by the Accounting Division.
b. The Stock Card is subject to audit by the COA while the Stock Ledger Card is not.
c. The Stock Card shows quantities only while the Stock Ledger Card shows monetary
balances only.
d. The stock Card shows quantities only while the Stock Ledger Card shows
quantities as well as monetary amounts.
10. This document is prepared when end users request for the issuance of inventories that are
available on stock.
a. Purchase Requisition Form
b. Custodian Inventory Slip
c. Purchase Order
d. Requisition and Issue Slip

1. Entity A, a government entity, purchases inventory to be held for sale in the ordinary course
of activities. Which of the following is the correct entry, to record the purchase?
a. Merchandise Inventory xxx
Account Payable xxx
b. Purchase xxx
c. a or b depending on the accounting policy being used
d. none, a government entity cannot hold inventories for sale; only for consumption.
2. Entity A, a government entity, distributed welfare goods to the intended recipients. The entry
to recognize the event is
a. Cost of sales xxx
Welfare Goods for Distribution xxx
b. Welfare Goods Expense xxx
c. Distribution costs xxx
d. None. The expense is recognized at the end of the period when a physical count is
performed. The expense is closed to the Income Summary account.

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3. At year-end, Entity A, a government entity, determines the following information:

 Carrying amount of goods held for distribution — P100,000.
 Net realizable value — P80,000.
 Current replacement cost — P90,000.
How much of the carrying amount of the inventory is recognized as expense?

a. 10,000
b. 20,000
c. 90,000
d. None of these
Use the following information for the next two questions:

Entity A, a government entity, determines the following information regarding the inventory of
Goods A, a non-unique item:
4. How much is ending inventory?

a. 116,382
b. 117,300
c. 116,495
d. Any of these.
5. How much is the cost of sale?

a. 207,805
b. 207,918 (56,862 + 151,056)
c. 207,000
d. Any of these.
Units Unit Cost Total Cost
Balance at January 1, 2002 3,000 19.55 58,650
January 6, 2002 10,200 21.5 219,300
TGAS 13,200 21.06 277,950
January 7, 2002 (2,700) 21.06 (56,862)
January 26, 2002 2,250 20.6 46,350
TGAS 12,750 20.98 267,438
January 31, 2002 (7,200) 20.98 (151,056)
Ending inventory 5,550 116,382

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1. Entity A, a government entity, purchases furniture and fixtures amounting to P14,000. Entity
A would most likely record the purchase as
a. Property, Plant and Equipment
b. Inventory Held for Consumption
c. Inventory Held for Manufacturing
d. Semi-Expendable Property
2. Accountable forms such as pre-printed forms used in government transactions are most
likely to be classified by a government entity as
a. Inventory Held for Consumption
b. Inventory Held for Sale
c. Semi-Expendable Property
d. Not considered inventory, according to the GAM for NGAs
3. Inventories are initially measured at cost and subsequently measured at

a. The Lower of Cost and Net realizable value for good s held for sale
b. The Lower of Cost and Current replacement cost for goods held for distribution.
c. a and b
d. cost
4. Which of the following cost formulas is not available for use by government entities?
a. Specific identification
b. FIFO
c. Weighted Average
d. All of these are available
5. The GAM for NGAs requires the use of which of the following inventory systems?
a. Perpetual inventory system
b. Periodic inventory system
c. a or b
d. none of these
6. Government entities record purchases of inventories

a. in an inventory account
b. in the Purchases account
c. a orb
d. as expenses
7. Which of the following may be included as cost of inventory?

a. freight-in under a freight collect, FOB destination sale term
b. trade discounts
c. cost of insurance while the goods are in transit
d. advertisement cost that resulted to the resale of inventory purchased

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8. Arrange the following in the sequence they are used in the requisition and receipt of
inventories by a government entity
I. Inspection and Acceptance Report (IAR)
II. Disbursement Voucher (DV)
III. Purchase Request (PR)
IV. Journal entry
V. Purchase Order (PO).
VI. Stock Card (SC)
a. III, V, I, VI, IV and II

b. III, V, I, IV, VI and II
c. III, V, I, II, VI and IV
d. V, III, I, II, VI and IV
9. This is maintained in the Property/Supply Division to record the movements of inventories.

a. Stock Card (SC)
b. Property/Supply Card (PSC)
c. Supplies Ledger Card (SLC)
d. Magic Card (MC)
10. This is used to report wasted materials, such as destroyed spare parts and other spoilages.
a. Wasted Stocks Card (WSC)
b. Waste Materials Report
c. Report on the Physical Count of Inventories
d. Inventory Custodian Slip

lOMoARcPSD|9470613
CHAPTER 8
False 1. Living animals and plants are always accounted for biological assets.
True 2. Biological assets are initially and subsequently measured at fair value less
costs to sell.
True 3. Agricultural produce is measured at fair value less costs to sell only at the
point of harvest.
True 4. An essential element of agricultural activity is the management of the
biological transformation of biological assets.
True 5. Entity A’s dairy cattle gave birth to a calf. The fair value less costs to sell of
the new born calf is P10,000. Entity A recognizes a gain of P10,000 from the
initial recognition of the calf.
True 6. A loss can arise from the initial measurement of a biological asset.
False 7. Fair value is quoted price in an active market less transaction costs.
True 8. Entity A acquires a biological asset for P100, equal to fair value, and incurs
transaction cost of P10 on the purchase. If the asset’s costs to sell is P20,
Entity A will recognize a loss of P30 on the initial recognition of the
purchased asset.
False 9. Entity A recognizes a gain of P100 from the change in FVLCS of its biological
assets during the period. If the change in FVLCS due to price change is P70,
the change in FVLCS due to physical change must be P40.
True 10. If there are more than one active markets for a biological asset, the entity
shall use the price in the market expected to be used when determining fair
value.

1. According to the GAM for NGAs, a biological asset is
a. an animal or plant
b. an asset used in farming
c. a living animal or plant
d. a harvested product
2. The common features of agricultural activities include all of the following except
a. capability to change
b. management of change
c. measurement of change
d. wind of change
3. Which of the following is an agricultural produce?

a. carabao
b. harvested palay
c. extra rice
d. powdered milk

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4. According to the GAM for NGAs, biological assets are measured as follows:
Initial measurement Subsequent measurement
a. fair value less cost to sell fair value less cost to sell
b. cost cost less accumulated
depreciation
c. cost cost less accumulated
depreciation and impairment
losses
d. fair value less costs to sell cost
5. Which of the following are not considered costs to sell?

a. commissions to brokers
b. levies by regulatory agencies and commodity exchanges
c. transfer taxes and duties
d. transport costs
6. According to the GAM for NGAs, if there is no active market for a biological asset
a. the entity shall measure the biological asset at cost less accumulated depreciation.
b. the entity shall measure the biological asset at cost less accumulated depreciation and
accumulated impairment losses.
c. the entity shall use a contract price in determining the fair value.
d. the entity shall estimate the market price using the guidance set forth in the GAM
for NGAs.
7. Agricultural produce after the point of harvest is accounted for as

a. Inventory
b. PPE
c. Prepaid assets
d. Investment property
8. The carrying amount of a group of biological assets of Entity A is P100,000 before any year-
end adjustment. If the year-end fair value is P120,000 while the year-end estimate of costs
to sell is P5,000, which of the following statements is correct?
a. Entity A will recognize a gain of P15,000 in surplus or deficit.
b. Entity A will recognize a gain of P15,000 directly in equity.
c. Entity A will recognize a gain of P10,000 in surplus or deficit.
d. Entity A will recognize a gain of P25,000 in surplus or deficit.
9. Which of the following need not be disclosed in relation to the accounting for biological
assets?
a. Consumable and bearer biological assets
b. Mature and immature biological assets
c. The amount of change in fair value less costs to sell due to physical changes and due to
price changes
d. The gain or loss on initial recognition of agricultural produce separately from that
of biological assets

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10. Entity A is determining the measurement of its biological assets at the end of the period.
Entity A’s biological assets consist of trees in a plantation forest. There is no separate active
market for these trees. However, Entity A was able to gather the following information:
 FVLCS of land, land improvements and trees as a package, P10M.
 FVLCS of land, P8M.
 FVLCS of land improvements, P500,000
How much is the valuation of the trees in Entity A’s year-end statement of financial position?
a. P10,000,000
b. P2,000,000
c. P1,500,000
d. P1,000,000

1. Living animals and plants are accounted for as biological assets
a. only if they are harvested for sale.
b. only if they relate to agricultural activity.
c. in all cases.
d. all of these.
2. The essential element of an agricultural activity is

a. the management of the biological transformation of biological assets.
b. the assets are alive.
c. it involves harvesting activity.
d. the conversion of raw materials into finished goods.
3. Which of the following is a biological asset?

a. Land used in farming
b. Picked fruits
c. Fruit cocktail
d. Trees in a plantation forest
4. Which of the following statements is correct regarding the measurement of assets related to
agricultural activities?
a. Biological assets are initially and subsequently measured at fair value.
b. No gain or loss shall be recognized on the initial recognition of a biological asset.
c. Agricultural produce is initially and subsequently measured at fair value less costs to
sell.
d. The gain or loss arising from the initial measurement of biological asset or
agricultural produce is recognized in surplus or deficit.

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5. According to the GAM for NGAs, biological assets whose fair value cannot be reliably
determined on initial recognition are measured as follows:
Initial measurement Subsequent measurement
a. fair value less cost to sell fair value less cost to sell
b. cost cost less accumulated
depreciation
c. cost cost less accumulated
depreciation and impairment
losses
d. fair value less costs to sell cost
Use the following information for the next three questions:

A group of Entity A’s biological assets has a carrying amount of P100,000 before year-end
adjustments. Information at year-end is as follows:
6. If Entity A expects to transact in Active Market #1, how much is the fair value?
a. 130,000
b. 120,000
c. 118,000
d. 123,000
7. If Entity A expects to transact in Active Market #2, how much is the carrying amount of the
biological assets in the year-end statement of financial position?
a. 135,000
b. 132,000
c. 120,000
d. 123,000
8. If Entity A expects to transact in Active Market #1, how much is the gain or loss from the
year-end remeasurement?
a. 18,000
b. 28,000
c. 32,000
d. 23,000

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On January 1, 20x1, Entity A has one 1-year old biological asset with carrying amount of
P1,000.
The following transactions occurred during the period:

a. On July 1, 20x1, one I-year old biological asset is acquired for P1,100, equal to the FVLCS
on this date.
b. On October 1, 20x1, one biological asset is born. The FVLCS of a newborn on this date is
P500.
The FVLCS on December 31, 20x1 are as follows:

Age FVLCS
new born P600
3 mos. old P800
1 yr. old P1,200
1.5 yr. old P1,500
2 yrs. Old P2,000
9. How much is change in FVLCS due to price change?

a. 400
b. 800
c. 1,800
d. 2,400
Asset Group Change in FVLCS

From beg. (1 yr.; 1 yr.) (₱1,200 - ₱1,000) x 1 200
Purchased on July 1 (1 yr.; 1 yr.) (₱1,200 - ₱1,100) x 1 100
Born on Oct. 1 (0; 0) (₱600 - ₱500) x 1 100
Change in FVLCS due to Price Change 400
10. How much is change in FVLCS due to physical change?

a. 600
b. 800
c. 1,600
d. 1,800
Asset Group Change in FVLCS

From beg. (2yrs.; 1yr.) (₱2,000 - ₱1,200) x 1 800
Purchased on July 1 (1.5yrs.; 1yr.) (₱1,500 - ₱1,200) x 1 300
Born on Dec. 31 (3 mos.; 0 yr.) (₱800 - ₱600) x 1 200
FVLCS of new born on Dec. 31 (₱500 x 1) 500
Change in FVLCS due to Physical Change 1,800

lOMoARcPSD|9470613
CHAPTER 9
False 1. An entity shall capitalize as part of the cost of an investment property the
operating losses incurred before the investment property achieves the
planned level of occupancy.
False 2. According to the GAM for NGAs, government entities may choose to use
either the cost model or the fair value model to subsequently measure
investment properties.
False 3. According to the GAM for NGAs, an entity shall not depreciate an asset while
it is classified as investment property.
False 4. Recoverable amount is the lower of an asset’s fair value less costs to sell
and value in use.
False 5. If an asset’s recoverable amount exceeds its carrying amount, the asset is
impaired.
False 6. An investment property with carrying amount of PIO is determined to have a
fair value less costs to sell of P7 and a value in use of P8. The impairment
loss is P3.
True 7. An investment property with carrying amount of P10 is sold for P7.
Transaction costs on the sale amounted to P1. The loss on derecognition is
P4.
False 8. An investment property that was previously impaired is determined to have a
new recoverable amount of P10. Right now, the asset’s carrying amount is
P7. However, if no impairment loss had been recognized in the prior year’
the asset would have a carrying amount of P9 by now. The gain on reversal
of impairment, therefore, is P1.
False 9. According to the GAM for NGAs, a government entity shall, at each reporting
date, determine the recoverable amount of an investment property and
compare it with its carrying amount.
True 10. An entity need not compute for the value in use of an asset if the entity has
no reason to believe that the value in use exceeds the fair value less costs to
sell.

1. Which of the following is considered an investment property?
a. Owner-occupied property awaiting disposal.
b. Property that is leased to another entity under a finance lease.
c. Property held for use in the production or supply of goods or services or for
administrative purposes.
d. A building held by the entity under a finance lease and leased out under one or
more operating leases on a commercial basis.
2. Which of the following would not be reported as investment property?

a. Property owned by the entity and leased out under one or more operating leases.
b. Property head by the entity to be leased out under one or more operating leases.
c. Real estate held with an undetermined future use.
d. Property owned by the entity and leased out to another entity under a finance
lease.

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3. Which of the following costs may properly be included in the carrying amount of an
investment property?
a. Start-up costs, such as opening costs.
b. Operating losses incurred before the investment property achieves the planned level of
occupancy.
c. Abnormal amounts of wasted materials, labor or other resources incurred in constructing
or developing the property.
d. Accrued taxes prior to acquisition date that the entity assumes an obligation to
pay.
4. Entity A, a government entity, acquires a building to be leased out under various operating
leases on commercial basis. Entity A incurs the following costs on the acquisition:
Purchase price P10,000,000
Legal services and transfer taxes 10,000
Refurbishments before occupancy 30,000
Occupancy permit fees 25,000
Property taxes after occupancy 8,000
Opening costs (blessing and feng shui) 500,000
The entry to initially recognize the investment property in Entity A’s books of account is
a. Investment Property, Land 10,065,000
Cash Modified Disbursement System (MDS), Regular 10,065,000
b. Investment Property, Land 10,565,000
c. Investment Property, Land 10,010,000
d. Investment Property, Land 10,040,000
5. During the period, Entity A, government entity, decides to use as an office one of its building
that has previously been leased out under various operating leases on commercial basis.
Information on the investment property is as follows:
Investment property – Building P1,000,000
Accumulated depreciation 800,000
At the date of change in use, the fair value of the investment property is P250,000. How
much is the gain (loss) on the transfer?
a. 50,000
b. (50,000)
c. 0
d. A transfer is prohibited.

lOMoARcPSD|9470613
6. On January 1, 20x1, Entity A acquires a building to be held as investment property for a total
cost of P1,500,000. The building is estimated to have a 30-year useful life and a 5% residual
value. Entity A uses the straight-line method of depreciation. On December 31, 20x5, Entity
A sells the building for P1,300,000. How much is gain (loss) on the sale?
a. 35,700
b. 37,500
c. 53,700
d. 75,300

Entity A determines an indication that its investment property might be impaired. Entity A then
gathers the following information:
Carrying amount of investment property P1,000,000
Fair value less costs to sell 900,000
Value in use 880,000
Following the impairment, Entity A revises its estimate of residual value to 5% of the recoverable
amount and the remaining useful life to 10 years.
7. How much is the impairment loss?

a. 120,000
b. 20,000
c. 100,000
d. 0
8. How much is the annual depreciation after the impairment?

a. 85,500
b. 90,000
c. 85,000
d. 95,000
9. Five years after the impairment, Entity A determines an indication that the impairment may
no longer exist. Entity A makes the following estimates and computations:
Fair value less costs to sell P800,000
Value in use P700,000
The investment property would have a carrying amount of P600,000 by now if no

impairment loss had been recognized in the past.
How much is the gain on the reversal of impairment?

a. 125,000
b. 129,500
c. 127,500
d. 327,500

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10. During the period, one of the buildings of Entity A, a government entity, was completely
destroyed by fire. The building has a historical cost of P1,000,000 and an accumulated
depreciation of P400,000. The building is insured for P700,000. Which of the following
statements is correct?
a. Entity A reports a net gain of P300,000 from the event in its year-end financial
statements.
b. Entity A reports a net gain of P100,000 from the event in its year-end financial
statements.
c. Entity A recognizes a loss of P600,000 but no gain.
d. Entity A shall treat the loss event and the insurance claim as separate events.

1. Which of the following is an investment property?
a. Property held to provide a social service and which also generate cash inflows.
b. Property held for strategic purposes.
c. Property occupied by employees.
d. Property that is being constructed or developed for future use as investment
property.
2. Which of the following is not an investment property?

a. Land held for long-term capital appreciation rather than for short-term sale in the
ordinary course of operations.
b. Land held for a currently undetermined future use.
c. A building owned by the entity (or held by the entity under a finance lease) and leased
out under one or more operating leases on a commercial basis.
d. Equipment held to be leased out under one or more operating leases on a
commercial basis to external parties.
3. According to the GAM for NGAs, government entities shall measure an investment property
as follows:
Initial Subsequent
a. cost Cost model or Fair value Model
b. cost Cost Model
c. fair value Fair value Model
d. fair value Cost Model or Fair value Model
4. Investment property acquired through donation is initially measured

a. equal to the carrying amount in the donor’s books
b. at the cost to the donor
c. at fair value on acquisition date
d. equal to the costs incurred in transferring title of the investment property to the entity

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5. An entity acquires investment property in exchange for a long-term noninterest-bearing note.

Assuming all of the following are determinable with sufficient reliability but differ in amounts,
which of them is most likely to be used in the initial measurement of the investment
property?
a. cash price equivalent of the investment property
b. cash price equivalent of the note payable
c. present value of future cash flows on the note payable discounted at the current market
rate
d. face amount of note which is equal to the installment price
6. Entity A acquires an investment property for P1,000,000 cash. Additional costs incurred are
as follows:
 Repairs and remodeling before occupancy, P50,000.
 Legal costs of transferring title to the property, P20,000.
 Repairs after occupancy, P15,000.
The investment property is estimated to have a remaining useful life of 10 years and a
residual value equal to 5% of initial cost. Entity A uses the straight line method of
depreciation. How much is the carrying amount of the investment property after one year?
a. 914,850
b. 968,350
c. 923,100
d. 872,100
7. According to the GAM for NGAs, transfers to or from investment property shall be made only
when there is a
a. change in management’s intention
b. change in use
c. change in business model
d. change in classification

lOMoARcPSD|9470613
8. During the period, Entity A decides to lease out under various operating leases on
commercial basis one of its buildings that has previously been used as office building.
Information on the building is as follows:
Historical cost P1,000,000
Accumulated depreciation 800,000
At the date of change in use, the fair value of the building is P250,000. Which of the
following is the correct reclassification entry?
a. Investment Property, Buildings 200,000
Accumulated Depreciation – Buildings 800,000
Buildings 1,000,000
b. Investment Property, Buildings 250,000
Buildings 1,000,000
Gain on reclassification 50,000
c. Investment Property, Buildings 250,000
Buildings 1,000,000
Revaluation Surplus 50,000
d. a or c, depending on the entity’s accounting policy

On January 1, 20x1, Entity A acquires a building to be held as investment property for a total
cost of P1,500,000. The building is estimated to have a 30-year useful life and a 5% residual
value. Entity A uses the straight-line method of depreciation.
On December 31, 20x5, Entity A determines that the building is impaired and makes the
following estimates:
Value in use P1,000,000
Following the impairment, Entity A revises its estimate of residual value to 5% of the recoverable
amount.
9. How much is the impairment loss on December 31, 20x5?

a. 226,500
b. 326,500
c. 257,500
d. 262,500

lOMoARcPSD|9470613
10. On December 31, 2x10, Entity A determines an indication that the impairment loss
recognized in the prior period may no longer exist. Entity A makes the following estimates
and computations:
Fair value less costs to sell P1,100,000
Value in use P1,050,000
How much is the gain on the reversal of impairment?

a. 215,000
b. 290,000
c. 75,000
d. 218,000

lOMoARcPSD|9470613
CHAPTER 10
True 1. The capitalization threshold for items of PPE by government entities if P15,000,
which is equal to the petty cash disbursement limit.
True 2. Individual items of PPE with values below the capitalization threshold but work
together as a group are recognized as PPE if the total cost of the group meets
the capitalization threshold.
False 3. Items below the capitalization threshold of PPE are recognized as Semi-
Expandable Property – a separate class of PPE.
False 4. According to the GAM for NGAs, trade discounts are excluded from the initial
measurement of items of PPE but not cash discounts.
True 5. The provision for decommissioning and restoration costs of an item of PPE is
subsequently measured at amortized cost.
False 6. According to the GAM for NGAs, government entities may choose either the
cost model or the revaluation model to subsequently measure their PPE.
True 7. Government entities record depreciation on a monthly basis.
False 8. An item of PPE with historical cost of P10, accumulated depreciation of P5 and
accumulated impairment losses of P1 is sold for P7. The gain on the sale is P2.
True 9. Heritage assets are measured at cost. However, they are not subsequently
depreciated, but subject to impairment.
True 10. Infrastructure assets are accounted for in the same manner as the other items
of PPE. However, infrastructure assets are generally assigned a residual value
of zero.
True 11. Reforestation projects are classified as land improvements.
False 12. Entity A’s equipment has a carrying amount of P10 before replacement of an
old part. The old part has a carrying amount of P2. The cost of the replacement
part is P5. The loss on replacement is P3.
True 13. Entity A acquires an equipment in exchange for another equipment owned by
Entity B. The carrying amount of Entity A’s equipment is P10 while its fair value
is P9. Entity B’s equipment has a fair value of only P7. However, Entity B pays
Entity A P2 for the difference. If the exchange has commercial substance, Entity
A will recognize a loss of P1 on the exchange.
True 14. Entity A acquires an item of PPE from an inter-agency transfer. Entity A will not
recognize any gain or loss from this transaction.
False 15. Government entities normally assign items of PPE a residual value of 15% of
cost.

lOMoARcPSD|9470613

1. Entity A acquires an equipment for P1M. The equipment is acquired not for active use in the
production of goods but rather as a standby equipment that will only be used if the main
equipment needs to be repaired. Does this equipment qualify for recognition as property,
plant and equipment?
a. Yes, all of the recognition criteria for a PPE are met.
b. No. the equipment does not satisfy all the recognition criteria for a PPE.
c. No. Although, the equipment satisfies some of the recognition criteria for a PPE, it does
not satisfy all. The equipment shall be classified as “Other Assets.”
d. Yes and no. During the periods the equipment is idle, it shall be classified as “Other
Assets.” During the periods the equipment is in active use, it shall be classified as “PPE.”
2. For government entities, the capitalization threshold for PPE is

a. P15,000 or more
b. more than P15,000
c. not less than P25,000
d. at least P5,000
3. According to the GAM for NGAs, cash discounts not taken on purchases of items of PPE
are
a. included in the cost of PPE
b. recognized as “Other Losses”
c. ignored
d. debited to the “Purchase Discount Lost” account
4. According to the GAM for NGAs, estimates of decommissioning and restoration costs of an
item of PPE are (choose the incorrect statement)
a. included in the initial cost of the item of PPE at the present value of the estimates.
b. credited to the “other provisions” account at their present value.
c. included in the initial cost of an item of PPE but not subject to subsequent
depreciation, although subject to amortization using the effective interest method.
d. are recognized as provisions, at present value, and subsequently measured similar to a
financial liability.
5. Which of the following costs is not added to the cost of an intern of PPE?
a. Costs of site preparation
b. Initial delivery and handling costs
c. Net disposal proceeds of samples generated during testing
d. Employee benefits arising directly from the acquisition of PPE

lOMoARcPSD|9470613
6. Entity A acquires 5 motor vehicles for a package price of P10M. In conjunction with the
purchase, the supplier provides Entity A a promotional item of 1 motor vehicle which is not of
the same type as those acquired. The fair value of the motor vehicle is P2M. Which of the
following statements is correct?
a. For individual costing purposes, the cost of each of the 5 motor vehicles is
P1,600,000.
b. For individual costing purposes, the cost of each motor vehicle acquired is P1,666,667.
c. The promotional item is recognized as gain equal to fair value.
d. a and c
7. Entity A acquires a building through self-construction (construction by administration). The

initial cost of the building will most likely be based on which of the following?
a. The contract price.
b. The costs of direct materials, direct labor and construction overhead, excluding
wastages.
c. a or b
d. Fair value at the acquisition date.
8. Entity A acquires a building through self-construction (construction by administration). The

construction costs incurred are
a. initially recorded in the Registries and recorded in the books of accounts only upon
completion of the construction.
b. initially recorded in the “Construction in Progress” account.
c. recorded in the “Buildings” account in the period they arise.
d. initially recorded as “Receivables” during the construction period.
9. Entity A, a government entity, acquires an equipment for P1M on August 6, 20x1. The
equipment’s estimated useful life is 5 year. How much is the carrying amount of the
equipment on December 31, 20x1?
a. 920,833
b. 936,667
c. 916,667
d. 979,167
Computation:
(1M x 95%(a) x 5 (b)/60 (c)) = 79,167 accumulated depreciation
(1M – 79,167) = 920,833
(a)
(100% less 5% standard residual value)
(b)
(August to December 20x1)
(c)
(5 yrs. x 12)

lOMoARcPSD|9470613
10. Which of the following assets would most likely not be assigned a residual value by a
government entity?
a. A major part of an equipment
b. A building held as investment property
c. A major tool
d. Infrastructure asset
11. Which of the following assets is generally not subject to depreciation?

a. Heritage assets
b. Infrastructure assets
c. Roads
d. a and b
12. Which of the following is considered a heritage asset?

a. road networks
b. museum
c. bridges
d. forest
13. Which of the following assets of a government entity is not subject to impairment?
a. Heritage assets
b. Reforestation projects
c. Idle land
d. None of these
14. A government entity derecognizes an item of PPE that is

a. idle
b. fully depreciated
c. unserviceable
d. all of these
15. The national government receives a P10M grant from a foreign government condition on the
construction of a highway. According to the GAM for NGAs, when shall the national
government recognize revenue from the grant?
a. when the grant is received
b. when the grant becomes receivable
c. when the grant becomes receivable and there is reasonable assurance that the attached
condition will be satisfied
d. when the condition is satisfied

lOMoARcPSD|9470613

1. Entity A acquires a train on January 1, 20x1. Information on costs are as follows:
Purchase price 9,000,000
Import duties 200,000
Cash discount not taken 100,000
Freight costs 800,000
Testing costs 300,000
Repairs after the train is brought to its operational state 600,000
Estimated costs of dismantling the train at the end of its
20-year useful 120,000
The current market rate of interest on acquisition date 12%. The entry to recognize the train in
the books of accounts is?
a. Trains 10,212,440
Other Losses 100,000
Cash-Modified Disbursement System (MDS), Regular 10,300,000
Other Provisions 12,440
b. Trains 10,312,440
Other Provisions 12,440
c. Trains 10,200,000
Other Losses 100,000
d. Trains 10,300,000
2. During the period Entity A starts the construction of a building by administration. Entity A
acquires construction materials for Ᵽ10M. the entry to record the transaction is
a. Construction Materials Inventory 10,000,000
Account Payable 10,000,000
b. Construction in Progress-Buildings And Other Structures 10,000,000
Account Payable 10,000,000
c. Construction in Progress-Buildings And Other Structures 10,000,000
Construction Materials Inventory 10,000,000
d. None of these.
3. Entity A exchanged an equipment with Entity B. Entity A however, did not recognize any gain
or loss on the exchange. Which of the following is a valid reason for this?
a. No cash was involved in the exchange.
b. The fair values of the equipment exchanged were equal
c. The exchanged lacks commercial substance.
d. All of these

lOMoARcPSD|9470613
4. Entity A receives a donation of land with fair value of Ᵽ1M.The donor stipulated that the land
shall only be used as a portion of a proposed highway. If in case the project is discontinued,
Entity A shall return the land to the donor. At the date of receipt of the donation, the
construction of the highway is not yet started. When should Entity A recognize the land in its
books of accounts?
a. Upon receipt of the donation.
b. When the construction of the highway is started.
c. When the construction of the highway is completed.
d. When the land is used in the construction of the highway.
5. During the year Entity A, an NGA, incurred interest of Ᵽ200,000 on a loan taken to
specifically finance the construction of a building. The proceeds of a loan were temporarily
invested and earned interest income of Ᵽ20,000. Which of the following entries best reflects
the recognition of the interest in the books of accounts of Entity A?
a. Interest expense 200,000
Interest Payable 200,000
b. Interest expense 180,000
c. Construction in Progress-Buildings
and Other Structures 180,000
d. Buildings and Other Structures 180,000

1. Which of the following is not one of the characteristics of property, plant and equipment?
a. It is a tangible asset.
b. It is held for use in the production or supply of goods, services or program outputs, for
rental to others, or for administrative purposes.
c. It is expected to be used for more than one reporting period.
d. It is intended for resale in the ordinary course of operations.
2. Which of the following does not result to the recognition of PPE?

a. A single purchase of equipment costing P15,000.
b. Purchases of equipment that work together as a group, individually costing P1,000 to
P5,000 but with a sum total cost of more than P15,000.
c. Bulk acquisitions of small items of PPE with aggregate cost of more than P15,000.
d. Acquisition of building for P10M intended to be leased out under various
operating leases on commercial basis.

lOMoARcPSD|9470613
3. Entity A acquires an equipment on account with the following terms: P500,000 list price,
20%, 10%, 2/10, n/30. Entity A incurs the following additional costs:
Non-refundable purchase taxes
(not yet included in the list price above) 10,000
Installation costs 100,000
Estimated costs of dismantling the equipment at
the end of its 10-year useful 20,000
The current market rate of interest on acquisition date is 10%.
How much is the initial cost of the equipment?

a. 468,713
b. 470,511 (500,000 x 80% x 90% x 98%) + 10,000 + 100,000 + (20,000 x PV of 1
@10%, n=10)
c. 472,341
d. 489,313
4. Entity A acquires 5 motor vehicles for a package price of P10M. In construction with the
purchase, the supplier provides Entity A a promotional item of 1 motor vehicle which is the
same as those acquired. The fair value the motor vehicle is P2M. Which of the following
statements is correct?
a. For individual costing purposes, the cost of each motor vehicle acquired is P2,000,000.
b. For individual costing purposes, the cost of each motor vehicle acquired is
P1,666,667.
c. The promotional item is recognized as gain equal to fair value.
d. a and c
5. Entity A acquires a building by awarding a construction contract to a contractor. The initial

cost of the building will most likely be based on which of the following?
a. The contract price.
b. The costs of direct materials, direct labor and construction overhead, excluding
wastages.
c. a or b
d. Fair value at the acquisition date.

lOMoARcPSD|9470613

Entity A exchange equipment with Entity B. Pertinent data are shown below:
Entity A Entity B
Carrying amount 85,000 130,000
Fair value 95,000 115,000
Cash paid by Entity A to Entity B 15,000
6. If the exchange has commercial substance, how much is the initial measurement of the
equipment received by Entity A?
a. 95,000
b. 110,000 (95,000 + 15,000)
c. 115,000
d. 85,000
7. If the exchange has commercial substance, how much is the gain (loss) recognized by
Entity A in the exchange?
a. 10,000 (95,000 – 85,000)
b. (10,000)
c. (15,000)
d. 15,000
8. Entity A incurs costs in repairing an item of PPE. It is not clear whether the repair is a minor
or major repair. Entity A shall
a. recognize the repair costs as expense
b. capitalize the repair costs
c. a or b
d. none of these
9. Entity A, a government entity, acquires an equipment for P1M on August 26, 20x1. The
equipment’s estimated useful life is 5 years. How much is the accumulated depreciation of
the equipment on December 31, 20x1?
a. 66,666
b. 63,333
c. 83,333
d. 79,167
Computation:
(1M x 95%(a) x 4 (b)/60 (c)) = 63,333
(a)
(100% less 5% standard residual value)
(b)
(September to December 20x1)
(c)
(5 yrs. x 12)’

lOMoARcPSD|9470613

At year-end, Entity A determines an indication that an equipment with carrying amount of
P400,000 is impaired. This equipment was acquired 5 year earlier and was originally estimated
to have a useful life of 10 years and a 5% residual value. Entity A determines the following
information:
Fair value less cost to sell P350,000
Replacement costs P700,000
10. How much is the impairment loss assuming Entity A compute for the value in use using the
Depreciable Replacement Cost Approach?
a. 32,667
b. 32,500
c. 50,000
d. 37,500
Computation:
Replacement cost 700,000
Accumulated depreciation - (700K x 95% x 5/10) (332,500)
Depreciated Replacement Cost – Value in use 367,500
Recoverable service amount (VIU - higher) 367,500

Carrying amount (400,000)
Impairment loss (32,500)
11. Assume the indication of impairment is physical damage to the equipment. Entity A
estimates that it would cost P10,000 to restore the equipment’s service potential to the level
before the physical change. How much is the impairment loss under the Restoration Cost
Approach?
a. 42,667
b. 42,500
c. 50,000
d. 47,500
Computation:
Depreciated replacement cost (see solution above) 367,500
Less: Restoration cost (10,000)
Recoverable service amount (VIU - higher) 357,500


lOMoARcPSD|9470613
12. Assume the indication of impairment is a significant decline in the expected output of the
equipment, which Entity A estimates to be 10%. How much is the impairment loss under the
Service Units Approach?
a. 62,667
b. 62,500
c. 50,000
d. 69,250
Computation:
Depreciated replacement cost (see solution above) 367,500
Multiply by: 90%
Recoverable service amount (FVLCS - higher) 350,000

13. Which of the following statements is correct?

a. Heritage assets are initially measured at cost and subsequently measured at cost less
accumulated depreciation and accumulated impairment losses.
b. Infrastructure assets are accounted for similar to the other items of PPE. However, they
are generally assigned a 10% residual value.
c. Reforestation project are not considered PPE.
d. Fully depreciated PPE are derecognized.
14. Which of the following is derecognized?

a. Idle PPE
b. Fully depreciated PPE
c. Unserviceable PPE
d. Partially damaged PPE
15. How do government entities account for borrowing costs?

a. Capitalized if the borrowing costs relate to the acquisition or construction of a qualifying
asset.
b. Expensed even if the borrowing costs relate to the acquisition or construction of a
qualifying asset.
c. Choice (a) for the national government; choice (b) for national government agencies.
d. Choice (a) for the national government agencies; choice (b) for the national
government.

lOMoARcPSD|9470613
CHAPTER 11
False 1. If it is not clear whether an expenditure is a research or a development cost,
it is treated as development cost.
True 2. The development cost of an internally generate intangible asset may be
capitalized if certain conditions are met.
False 3. A government entity does not amortize intangible assets.
False 4. 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.
True 5. For subsequent measurement, government entities classify intangible assets
into those with finite and indefinite useful lives, similar to business entities.
False 6. Government entities normally assign their intangible assets a residual value
of 5% of cost.
True 7. Subsequent expenditures on recognized intangible assets are generally
expensed unless it is clear that the expenditures meet the recognition criteria
for intangible assets.
False 8. A government entity acquires an intangible asset with indefinite useful life for
P100. 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 P10.
False 9. The amortization of an intangible asset is credited directly to the intangible
asset account, according to the GAM for NGAs.
False 10. An entity determines an indication of impairment for the intangible asset with
carrying amount of P100. The entity calculates a fair value less costs to sell
of P90 and a value in use of P105. The impairment loss is P5.

1. In which of the following instances is an asset not considered to be identifiable?
a. The asset can be sold separately regardless of whether the entity intends to do so.
b. The asset arises from a contractual right.
c. The asset can be leased out separately on its own or licensed to be used separately by
other entities in exchange for cash payments.
d. The asset can only be transferred if the entity is liquidated.
2. Which of the following is most likely to be recognized as intangible asset by a government

entity?
a. Internally generated brand
b. Subsequent expenditure on a copyright
c. Development costs incurred in internally generating a patent
d. Publishing title acquired as a donation

lOMoARcPSD|9470613
3. Subsequent expenditures on recognized intangible assets are

a. generally capitalized and amortized over the remaining useful life or the extended useful
life.
b. generally expensed, unless they meet the definition of an intangible asset and the
asset recognition criteria.
c. generally capitalized if they meet the conditions of technical feasibility, probable future
economic benefits, and reliable measurement.
d. not accounted for.
4. According to the GAM for NGAs, government entities shall use this measurement model in
subsequently measuring intangible assets.
a. Cost model
b. Revaluation model
c. Fair value model
d. a or b
5. 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
6. The default amortization method for intangible assets with finite useful life is
a. straight line method
b. sum-of-the-years digits
c. double declining
d. none of these
7. which of the following statements is incorrect regarding the accounting for impairment of
intangible assets under the GAM for NGAs?
a. An entity is required to test for impairment an intangible asset with indefinite useful life or
an intangible asset not yet available for use at least annually or whenever there is an
indication of impairment.
b. An entity shall test for impairment an intangible asset with definite useful life only when
an indication of impairment exists.
c. The accounting for impairment of intangible assets, and reversal thereof, is the same as
those of investment property and PPE.
d. Intangible assets are subject to amortization using the straight line method over a
period of 2 to 10 years but are not subject to impairment.

lOMoARcPSD|9470613

On December 1, 20x1, Entity A acquired a computed software for P1,000,000 and incurred the
following costs:
 Non-refundable purchase taxes of P30,000, not included in the purchase price above.
 Professional fees incurred in the installation of the software, P100,000.
 Modifications to the software before it was brought to the condition intended by
management for use, P60,000.
 Costs of testing the software, P10,000.
 Training costs of staff who will be using the software, P200,000.
 Costs of updating the software after it was available for use in the condition originally
intended by management, P5,000.
 Administrative and other general overhead costs incurred on the acquisition and
installation of the software, P15,000.
The software’s useful life is 5 years.
8. The entry to initially recognize the software is

a. Computer Software 1,200,000
Cash-Modified Disbursement
System (MDS), Regular 1,200,000
b. Computer Software 1,140,000
c. Computer Software 1,400,000
d. Computer Software 1,190,000
9. Entry to recognize the amortization expense for the current year is

a. Amortization-Intangible Assets 240,000
Computer Software 240,000
b. Amortization-intangible Assets 240,000
Accumulated Amortization-Computer Software 240,000
c. Amortization-Intangible Assets 20,000
Accumulated Amortization-Computer Software 20,000
d. Amortization-Intangible Assets 20,000

lOMoARcPSD|9470613
10. On December 31, 20x2, Entity A assesses an indication impairment and makes the following
estimates:
Value in use P800,000
The entry to recognize the event is

a. Impairment Loss-Intangible Assets 140,000
Accumulated Impairment Losses-Computer Software 140,000
b. Impairment Loss-Intangible Assets 140,000
c. None, the intangible asset is not impaired.
d. None, intangible assets held by government entities are not subject to impairment.

1. Which of the following is not one of the essential an intangible asset?
a. Separability
b. Arising from binding arrangement
c. Control
d. Held for use in the production or supply of goods
2. An intangible asset is identifiable if it

a. is separable
b. arises from binding arrangements
c. is a non-monetary asset without physical substance.
d. a orb
3. Which of the following is an indicator of control?

a. the ability of an entity to benefit from an asset.
b. the ability of an entity to deny or regulate the access of others to the benefit of an asset.
c. an entity can, depending on the nature of the asset, exchange it, use it to provide goods
or services, exact a price for others’ use of it, use it to settle liabilities, hold it, or perhaps
even distribute it to owners.
d. all of these.
4. Which of the following is most likely not an intangible asset?

a. Computer
b. Trademark
c. Acquired import quota
d. Customer list
5. A purchased intangible asset is initially measured at

a. cost
b. fair value
c. the sum of research and development costs
d. the total of development costs

lOMoARcPSD|9470613
6. The development costs of an internally generated intangible asset can be capitalized if

certain conditions are met. Which of the following is not one of those conditions?
a. Technical feasibility of completing the intangible asset.
b. Intention to complete the intangible asset.
c. Ability to measure reliably the expenditure attributable to the intangible asset during its
development.
d. Existence of similar assets in the market or economic environment where the
entity operates.
7. Internally generated brands, mastheads, publishing titles, lists of users of a service, and
items similar in substance are not recognized as intangible assets because
a. it is illegal to recognize these items as assets, according to international intellectual
property laws and other business laws.
b. it is often difficult to measure separately the costs of these items.
c. these cannot be distinguished from the cost of developing the entity’s operations
as a whole.
d. the entity normally cannot demonstrate its ability to use these, when completed during
their development phase.
8. Government entities normally assign their intangible assets a residual value of

a. 5% of cost
b. 10% of cost
c. 25% of cost
d. zero
9. Which of the following intangible assets is not amortized?

a. Intangible asset with infinite useful life
b. Intangible asset with finite useful life
c. All intangible assets held by a government entity
d. Intangible asset not yet available for use
10. An entity shall test for impairment an intangible asset with finite useful life
a. only when an indication of impairment exists.
b. at least annually or whenever there is an indication of impairment.
c. at each reporting date, including interim periods, if the entity prepares interim financial
statements.
d. Never, because intangible assets held by a government entity is not subject to
impairment; only amortization.

Gov Acctg Solman Millan

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Gov Acctg Solman Millan

Government Accounting (University of La Salette)

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PROBLEM 1-2: MULTIPLE CHOICE

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4. The Bureau of Treasury (BTR) is responsible for

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PROBLEM 1-3: FOR CLASSROOM DISCUSSION

2. Which of the following is not a source of revenue for the government?

3. Entity A (a government agency) is entrusted with government resources. According to P.D.

5. The Department of Budget and Management (DBM) is responsible for

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8. Which of the following qualitative characteristics is improved when information is reported on

10. Which of the following financial statements is peculiar to a government entity?

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PROBLEM 2-2: MULTIPLE CHOICE

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6. It is an authorization issued by the DBM to NGAs to incur obligations. It is also referred to as

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9. Disbursements by government entities are most commonly made through

10. Responsibility accounting requires all of the following except

PROBLEM 2-3: MULTIPLE CHOICE

1. The allocation of the P100B funds to Entity A is referred to as

2. The allocation of the P100B funds to Entity A is authorized by

3. The P45B authorization is referred to as

4. The P45B authorization is received by Entity A from

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6. Which of the following best describes the P15B monthly authorizations?

7. The P15B monthly authorizations are received by Entity A from

9. In Entity A’s first quarter Statement of Appropriations, Allotments, Obligations,

10. In Entity A’s first quarter Statement of Appropriations, Allotments, Obligations,

11. In Entity A’s first quarter Statement of Appropriations, Allotments, Obligations,

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PROBLEM 2-4: FOR CLASSROOM DISCUSSION

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10. Under responsibility accounting, a manager’s performance is evaluated

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PROBLEM 3-2: MULTIPLE CHOICE

3. This type of expenditure pertains to all types of employee benefits.

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PROBLEM 3-3: MULTIPLE CHOICE

3. The receipt of an appropriation is recorded by a government entity in the

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9. The “Subsidy from National Government” account is credited when recording a

10. Expenditures to acquire long-term assets are most likely classified as

PROBLEM 3-4: MULTIPLE CHOICE

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

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

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

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PROBLEM 4-2: MULTIPLE CHOICE

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

4. The taxable event for value added tax (VAT) is the

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