PRE8 - Government Accounting PDF

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CHAPTER 61. According to the GAM for NGAs, all financial assets are initially measured at fair value. FALSE2. According to the GAM for NGAs, government entities shall prepare bank reconciliations only at year-end or whenever the need arises. FALSE3. Only debt instruments with remaining maturity of 3...

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CHAPTER 6 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. FALSE 5. No journal entry is prepared when a disbursement is made out of the petty cash fund. TRUE 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. FALSE 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. TRUE 11. Which of the following is not considered a financial asset? Prepaid assets 12. A cash shortage of a government entity is most likely recorded as a Debit to a receivable account 13. Dishonored checks are recorded by a government entity as Other Receivables 14. The entry to record the replenishment of a petty cash fund of a government entity is (Debit) Expense accounts (Credit) CashModified Disbursement System (MDS), Regular 15. 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. Adjusted Balance Method 16. Which of the following may be paid through the petty cash fund of government entity? Pantry Supplies worth P15,000 17. 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 Imprest System 18. According to the GAM for NGAs, the establishment of a petty cash fund Requires the approval of the Head of Agency 19. The “Loans Receivable” account is most likely to be used in the books of accounts of which of

the following government agencies? BTr 20. Which of the following is not one of the characteristics of a derivative? It requires no notional amount (or only a very minimal notional amount) 21. 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. Transaction costs 22. Which of the following is not one of the categories of financial assets under the GAM for NGAs? Financial asset through other comprehensive income 23. Entity A acquires an investment for P1,000,000. Transaction costs amount to P10,000. At yearend, the investment has a fair value of P900,000. If the investment is classified as financial assets through surplus or deficit, how much is the loss from the change in fair value? 0 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-tomaturity investments. Transaction costs on the acquisition amount to P125,919. The issuer pays annual interest every December 31. The effective interest rate is 14%. 24. The initial carrying amount of the investment on January 1, 20x1 is 1,456,792 25. The interest income in 20x1 is 221,580

33. An unexplained cash overage of a government entity is recorded as a Credit to miscellaneous income account

26. If the investment is classified as available for sale financial asset and the fair value at yearend is P1,800,000, how much is the gain (loss) from the change in fair value? 238,869 27. If the investment is classified as available for sale financial asset, how much is the interest income in 20x1? 221,580 28. According to the GAM for NGAs, changes in fair value of investments classified as available for sale financial assets are Recognized in net assets 29. 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 recognized 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? Available-for-sale financial assets 30. 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? Held-to-maturity investments 31. According to the GAM for NGAs, a government entity’s cash comprises all of the following except. Cash equivalents 32. Which of the following is excluded from the amount of cash that is reported in the statement of financial position of a government entity? Post-dated checks received 34. All of the following are considered internal controls over cash except 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 35. The per transaction threshold for petty cash disbursements of a government entity is P15,000 36. A government agency shall prepare a bank reconciliation for each bank account maintained. Bank reconciliations are prepared using the Adjusted Balance method 37. 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 Debit Memo 38. According to the GAM for NGAs, receivables are measured at (Initial) Fair value plus transaction costs (Subsequent) Amortized cost 39. The subsequent changes in the fair value of an investment that is classified as available for sale are recognized in Net assets or equity 40. According to the GAM for NGAs, the very purpose of derivatives is Risk management

CHAPTER 7 1. According to the GAM for NGAs, inventories of government entities are subsequently measured at net realizable values or current replacement cost depending on the whether the inventory is classified as held for sale or held for distribution. FALSE 2. According to the GAM for NGAs, purchase of machinery, equipment, furniture and fixtures and similar items below the P10,000 capitalization threshold for PPE are recorded as inventories by a government entity. FALSE 3. Relief goods, office supplies, equipment and furniture and fixture are items that may appropriately be recorded as inventories by a government entity. TRUE 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 the 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. FALSE

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

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. FALSE? P2. During the period, Entity A acquired 1 brown egg for P3 and 1 blue egg for P4. Entity A sold the brown egg during the period.

9. Under the specific identification cost formula, entity A’s cost for sale is P2. FALSE 10. If the eggs are ordinarily interchangeable, entity A’s cost of sale is P25, assuming the sale occurred only after all the purchases were made. FALSE 11. Entity A, a government entity, purchases inventories. To record a purchase, Entity A would most likely debit the (an) Inventory account 12. Entity A, a government hospital, acquires medicines to be sold in its pharmacy. Entity A would record the medicines acquired as Inventory Held for Sale 13. Entity 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 Inventory Held for Distribution 14. According to the GAM for NGAs, this shall be used for large numbers of items of inventory that are ordinarily interchangeable. Weighted average cost applied in a perpetual inventory system 15. This refers to the cost an entity would incur to acquire an asset on the reporting date. Current replacement cost

23. 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

16. Which of the following inventories of a government entity would be subsequently measured at the lower of cost and current replacement cost? Books to be distributed to students in public schools 17. Which of the following events of transactions would not lead to the recognition of the cost of inventory as expense? Inventory written down 18. The accounting division of a government entity uses this to record and monitor the movements and balances of inventories. Stock Card 19. Which of the following statements correctly differentiates the stock card from the stock ledger card? The stock card shows quantities only while the stock ledger card shows quantities as well as monetary amounts 20. This document is prepared when end users request for the issuance of inventories that are available on stock. Requisition and Issue slip 21. 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? (Debit) Merchandise Inventory (Credit) Accounts Payable 22. Entity A, a government entity, distributed welfare goods to the intended recipients. The entry to recognize the event is (Debit) Welfare Goods Expense (Credit) Welfare Goods for distribution *Current replacement cost - P90,000 How much of the carrying amount of the inventory is recognized as expense? 10,000 24. How much is ending inventory?

116,382 25. How much is the cost of sale? 207,918 26. Entity A, a government entity, purchases furniture and fixture amounting to P14,000. Entity A would most likely record the purchase as Semi-Expendable Property 27. Accountable forms such as pre-printed forms used in government transactions are likely to be classified by a government entity as Inventory held for Consumption 28. Inventories are initially measured at cost and subsequently measured at a. The lower of cost and net realizable value for goods held for sale b. The lower of cost and Current replacement cost for goods held for distribution

31. Government entities record purchases of inventories In an inventory account 32. Which of the following may be included as cost of inventory? Advertisement cost that resulted to the resale of inventory purchased 33. 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) III, V, I, VI, IV and II 34. This is maintained in the Property/Supply Division to record the movements of inventories Stock Card (SC)

c. A and B 29. Which of the following cost formulas is not available for use by government entities? FIFO 30. The GAM for NGAs requires the use of which of the following inventory systems? Perpetual Inventory system

35. This is used to report wasted materials, such as destroyed spare parts and other spoilages. Waste Materials Report CHAPTER 14 1. According to the GAM for NGAs, government entities shall present financial statements at least annually. TRUE 2. The statement of financial position is dated as at the reporting date. TRUE

4. The GAM for NGAs requires government

3. According to the GAM for NGAs, a condensed statement of financial position is one that presents line items only rather than all the accounts used by the entity. TRUE entities to present expenses in the statement of financial performance according to the function of those expenses. FALSE

5. Government entities present information one other comprehensive income, just like business entities. FALSE 6. The statement of financial performance of a government entity is the exact equivalent of the statement of comprehensive income of a business entity. FALSE 7. Non-adjusting events are never recognized but are always disclosed. FALSE 8. Prior period errors are corrected by retrospective restatement. TRUE 9.

In the first instance, changes in accounting policies are accounted for by retrospective application. FALSE

10. Unlike business entities, government entities are required to prepare interim financial statements on a quarterly basis. TRUE 11. Which of the following is not one of the components of a complete set of generalpurpose financial statements of government entities? Statement of Appropriations, Allotments, Obligations, Disbursements and Balances 12. Additional disclosures shall be made in the notes if an entity presents expenses by Function

21. These refer to financial statements intended to meet the needs of users who are not in a

13. Which of the following is most likely applicable to a government entity but not to a business entity? Presenting a statement of financial position in a detailed format 14. The statement of financial performance of a government entity differs from the statement of profit or loss of a business entity in which of the following respects? The use of the term “surplus or deficit” rather than “profit or loss” 15. The closing of the “Cash-Treasury/Agency Deposit, Regular” account to the “Accumulated Surplus (Deficit)” account is presented in the statement of changes in equity. Under the “Adjustment of net revenue recognized directly in net assets/equity” line item 16. The GAM for NGAs requires which of the following methods of presenting cash flows from (used in) operating activities in the statement of cash flows? Direct Method 17. A government entity presents payments for purchases of inventories in the statement of cash flows Net of withholding taxes 18. Which of the following cash flows is presented in the financing activities section of a statement of cash flows? Amortization of a finance lease liability 19. The notice of cash allocation (NCA) is least likely to be reported in which of the following financial statements? Statement of financial position 20. Which of the following is an adjusting event? Sale of inventories that evidences the correct NRV of inventories at the reporting date position to demand reports tailored to meet their particular information needs? General Purpose Financial Statements

22. Which of the following is an objective of the general purpose financial statements of government entities? a. To provide information about the entity’s financial position, financial performance, and cash flows that is useful to a wide range of users in making economic decisions. b. To demonstrate the accountability of the entity for the resources entrusted to it. d. a and b 23. According to the GAM for NGAs, the responsibility over financial statements rests with the entity’s management particularly the a. Head of the Entity b. Head of Finance/Accounting d. a and b 24. Which of the following is a peculiar general purpose financial statement of government entities? Statement of Comparison of Budget and Actual Amounts 25. Amounts in the statement of financial position show Cumulative balances from the formation of the entity up to the reporting date 26. Which of the following is not among the other reports required to be submitted by government entities to the COA? A completed 14-column worksheet in yellow color

27. According to the GAM for NGAs, the statement of financial position is presented in comparative form and in a. A condensed format b. A detailed format c. A classified format d. All of these 28. The effect of which of the following is recognized directly in equity rather than in surplus or deficit Gains or losses on remeasuring available-forsale financial assets 29. Finance lease payments pertaining to the reduction of the outstanding finance lease liability are classified in the statement of cash flows as Financing activities 30. Entity A presents its cash flows from operating activities using the direct method. Entity A holds foreign currencies. These are appropriately translated to the spot exchange rates at the reporting date. How should Entity A present the translation differences in the statement of cash flows? As a reconciliation of the cash and cash equivalents at the beginning and end of the period, presented separately from the operating, investing, and financing activities. CHAPTER 16 1. Which of the following statements is correct? Although the PFRSs are designed to be applied by business entities, they can also be applied by non-profit organizations 2. It is an organization that carries out socially desirable needs of the community or its members without the intention of making profit NPO

3. According to PAS 1 Presentation of financial statements, a non-profit entity that applies the PFRSs May need to amend the descriptions used for particular line items in the financial statements and for the financial statements themselves 4.

According to the Preface to International Financial Reporting Standards, non-profit entities May find the IFRSs appropriate

5. Which of the following principles used by business entities is not applicable to non-profit organizations? Disclosure of earnings per share 6. For a non-profit entity, the operating activities section of the statement of cash flows can be prepared using a. direct method b. indirect method c. a or b 7. Which of the following financial statements are prepared by non-profit organizations? I. Statement of financial position II. Statement of activities III. Statement of cash flows IV. Notes d. All of these 8.

In current practice, the financial reporting for non-profit organizations (choose the incorrect statement) Is essentially similar to that of business entities

9. The statement of cash flows of a non-profit entity classifies cash flows into Operating, Investing and financing activities

10. Which of the following is not applicable to nonprofit entities? Measuring investments in equity securities using the lower of cost and market value 11. Which of the following is not applicable to nonprofit organizations? Depreciating and equipment using the sum-ofthe-years’ digits method 12. Which of the following is not applicable to nonprofit organizations? Accounting for combinations of entities using the principles provided under PFRS 3 Business combinations 13. Which of the following may appropriately be applied by a non-profit organization when accounting for a lease contract that does not qualify as a donation? PFRS 16

14. According to SFAS No.116, restricted contributions received by an NPO are recognized As restricted revenues 15. According to SFAS No. 116, a restricted fund for the acquisition of a plant asset which was disbursed during the period Increases temporarily restricted net assets 16. What is the current-period effect of a fund received in the previous period that was restricted for the payment of salaries of personnel which was totally disbursed in the current period? Net decrease in unrestricted net assets 17. Unconditional promises t...