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
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
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.
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.
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
CHAPTER 2
PROBLEM 1-1: TRUE OR FALSE
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.

PROBLEM 2-2: MULTIPLE CHOICE

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
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.
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

PROBLEM 2-3: MULTIPLE CHOICE

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
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

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

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

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

Disbursements and Balances, how much is shown as “unpaid obligations?”
a. P6B
b. P5B
c. P10B
d. P15B
PROBLEM 2-4: FOR CLASSROOM DISCUSSION
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
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.
CHAPTER 3
PROBLEM 3-1: TRUE OR FALSE
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.

PROBLEM 3-2: MULTIPLE CHOICE

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)
4. Entity A, a government entity, made disbursements for the travelling expenses of its
personnel. These expenditures are most likely classified as
a. Personal Services (PS)
b. Maintenance and Other Operating Expenses (MOOE)
c. Financial Expenses (FE)
d. Capital Outlays (CO)

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?
a. Cash-Tax Remittance Advice
b. Cash-Modified Disbursement System (MDS), Regular
c. Cash-Treasury/Agency Deposit, Regular
d. Cash – Collecting Officer

9. Which of the following accounts is credited when a government entity remits contributions to
the GSIS, PhilHealth and Pag-IBIG?
a. Cash-Tax Remittance Advice
b. Cash-Modified Disbursement System (MDS), Regular
c. Cash-Treasury/Agency Deposit, Regular
d. Cash – Collecting Officer

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
PROBLEM 3-3: MULTIPLE CHOICE
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.
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

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

PROBLEM 3-4: MULTIPLE CHOICE

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.
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
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)
b. Maintenance and Other Operating Expenses (MOOE)
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
CHAPTER 4
PROBLEM 4-1: TRUE OR FALSE
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.

PROBLEM 4-2: MULTIPLE CHOICE

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
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
PROBLEM 4-3: FOR CLASSROOM DISCUSSION
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.
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
CHAPTER 5
PROBLEM 5-1: TRUE OR FALSE
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.

PROBLEM 5-2: MULTIPLE CHOICE

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.
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)
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

PROBLEM 5-3: MULTIPLE CHOICE

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
b. Cash-Modified Disbursement System (MDS), 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
Cash-Modified Disbursement System (MDS), Regular 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
Cash-Modified Disbursement System (MDS), Regular xxx
d. No journal entry.
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
b. Accounts Payable xxx
Cash – Modified Disbursement System (MDS), Regular xxx
c. Accounts Payable xxx
Cash-Constructive Income Remittance xxx
d. No journal entry.

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
c. Accounts Payable xxx
Cash-Constructive Income Remittance xxx
d. No journal entry.

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 – Modified Disbursement System (MDS), Regular xxx
b. Accounts Payable xxx
Subsidy form National Government xxx
c. Accounts Payable xxx
Cash-ADA xxx
d. None. The transaction is recorded only in the Registries and ORS.
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
Subsidy form National Government 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

PROBLEM 5-4: MULTIPLE CHOICE

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)
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
b. Cash-Modified Disbursement System (MDS), 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
Cash-Modified Disbursement System (MDS), Regular xxx
To record payment for electricity expenses
b. Accounts Payable xxx
Cash-Modified Disbursement System (MDS), Regular xxx
To record payment of accounts payable
c. Advances to Officers and Employees xxx
Cash-Modified Disbursement System (MDS), Regular xxx
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
Cash-Modified Disbursement System (MDS), Regular xxx
To record payment for electricity expenses
b. Accounts Payable xxx
Cash-Modified Disbursement System (MDS), Regular xxx
To record payment of accounts payable
c. Advances to Officers and Employees xxx
Cash-Modified Disbursement System (MDS), Regular xxx
To record grant of cash advance for travel
d. None. All of these are check disbursements.
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
Accounts Payable xxx
b. Accounts Payable xxx
Cash – Modified Disbursement System (MDS), Regular xxx
c. Office Supplies Inventory xxx
Cash-Modified Disbursement System (MDS), Regular xxx
d. No journal entry.

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