Name:______________________________________ Date: ___________

1st Modular Exam

ACC117: Accounting for Government and Non-Profit Organizations

I. TRUE OR FALSE (20 pts.)

Direction: Write TRUE if the statement is correct. Otherwise, write FALSE. Strictly no
erasures. Use capital letters only.

1 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.
2 Taxes are the main source of funds of the government.
3 Currently, the financial reporting of government entities is based on NGAs.
4 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.
5 The GAM for NGAs is promulgated primarily to harmonized government accounting
standards with the U.S. GAAP.
6 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.
7 Appropriation is also called obligational authority.
8 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.
9 Other sources of funds of the government include fees, borrowings, and grants
from other governments and international bodies.
10 An entity can incur obligations after receiving notice of its appropriation but before
receiving the allotment.
11 A government entity can make disbursements even before it receives a disbursement
authority.
12 Budget deliberations in the Congress start in the House of Senate.
13 After the budget call from the DBM, the proposed budget of various agencies are
submitted to the Office of the President for review.
14 The principles in the GAM for NGAs are similar to the principles in the PFRSs.
15 The GAM for NGAs is promulgated by the Philippine Congress under the authority
conferred to it under the Philippine Constitution.
16 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.
17 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.
 18 A government entity must first receive an allotment before it can incur obligations.
19 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.
20 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.

II. MULTIPLE CHOICE (20 pts.)

Direction: Write the letter of the correct/best answer on your answer sheet. Strictly no erasures.
Use capital letters only.

This type of budget is prepared in such a way that estimated revenues exceed estimated
expenditures.
a. Balance budget
1
b. Excess budget
c. Obligations budget
d. Budget meal
It is an authorization issued by the DBM to NGAs to incur obligations. It is also referred
to as
Obligational Authority.
2 a. Appropriation
b. Allotment
c. Budget call
d. Budget hearings
The transfer of government funds from one officer to another requires the prior
authorization
of the
3 a. Commission on Audit
b. Head of Agency
c. The President of the Republic of the Philippines
d. Bureau of Treasury
Disbursements by government entities are most commonly made through
a. MDS Checks
4 b. Cash
c. Petty Cash Fund
d. Credit Card
It is the authorization made by a legislative body to allocate funds for purposes specified
by
the legislative or similar authority.
5
a. Appropriation
b. Allotment
c. Obligation
 d. Disbursement
All of the following are requirements peculiar to a government entity. Which is not?
a. Presenting budget information in the financial statements.
6 b. Fund cluster accounting.
c. Incorporating budgetary controls in the financial reporting system.
d. Accrual basis of accounting.
What is the legal basis of the COA in promulgating the GAM for NGAs?
a. PD 1445 State Audit Code of the Philippines
7 b. The Philippine Constitution
c. RA 9298 The Philippine Accountancy Act of 2004
d. Philippine Public Sector Accounting Standards
According to the GAM for NGAs, the basis of accounting to be applied by government
entities is the
a. Cash basis
8
b. Accrual basis
c. Modified accrual basis
d. Any of these as a policy choice
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
9
b. Reliability
c. a and b
d. Nothing is violated
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
10 a. Adjudication Conference Committee
b. Bicaramel Conference Committee
c. Referee Conference Committee
d. Bicameral Conference Committee
It refers to the amount contracted by a duly authorized administrative officer for which
the
government is held liable.
11 a. Appropriation
b. Allotment
c. Obligation
d. Disbursement
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?
12 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.
13 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
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
14
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.
This is necessary before government entities can enter into contracts that bind the
government for the eventual disbursement of government funds.
a. Disbursement authority
15
b. Notice of cash allocation
c. Allotment
d. Incurrence of obligation
Which of the following qualitative characteristics is improved when information is
reported on
a timely basis?
16 a. Relevance
b. Reliability
c. Understandability
d. a and b
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
17 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
which of the following is not charged with government accounting responsibility under
the
GAM for NGAs?
18 a. COA
b. DBM
c. NGAs
d. House of Representative
Which of the following does not properly described the budget process used in the
Philippines?
19
a. Bottom-up budgeting
b. Top-down budgeting
 c. Zero-based budgeting
d. Non-incremental budgeting
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.
20 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
To achieve a proper balance between relevance and reliability, the overriding
consideration
is
21 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.
Arrange the following steps according to the sequence that they appear in the budget
cycle.
I. Allotment
II. Disbursement Authority
III. Disbursement
22 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
What is the correct sequence of the following steps in the budget process?
I. Budget Legislation
II. Budget Accountability
III. Budget Preparation
23 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
Which of the following qualitative characteristics does an entity most likely would need
to
make some tradeoffs?
24 a. Faithful Representation and Substance Over Form
b. Materiality and Relevance
c. Relevance and Reliability
d. Understandability and Comparability
Which of the following is not a source of revenue for the government?
25
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.
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
26
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.
Arrange the following steps according to the sequence that they appear in the budget
cycle.
I. Allotment
II. Bicameral Deliberations
III. Budget Accountability Reports
27 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
Which of the following is not one of the fund clusters of a government entity?
a. Regular Agency Fund
b. Foreign Assisted Projects Fund
28
c. Special Account-Locally Funded/Domestic Grants Fund
d. Business Related Funds
e. Petty Cash Fund
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
29 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
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,
30
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
Which of the following is tasked in keeping the general accounts of the government,
supporting vouchers, and other documents?
a. COA
31
b. DBM
c. NGAs
d. Congress
All disbursements of government entities must be in conformance with the law and the
a. National budget
32 b. COA audit findings
c. PPSASs
d. PFRSs
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
33
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.
These refer to the attributes that make information useful to users.
a. Usefulness characteristics
34 b. Quantitative characteristics
c. Qualitative characteristics
d. Fundamental principles
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
35
a. zero budgeting
b. incremental budgeting
c. scratch budgeting
d. zero-based budgeting
Entity A, a government entity, wants to make disbursements. Arrange the following
events in
36 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
Which of the following financial statements is peculiar to a government entity?
a. Balance Sheet
37 b. Statement of Cash Flows
c. Statement of Comparison of Budget and Actual Amounts
d. Statement of Changes in Equity
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.
38
a. Automatic Appropriations
b. New General Appropriations
c. Continuing Appropriations
d. Supplemental Appropriations
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.
39 a. bottoms-up budgeting
b. zero-based budgeting
c. top-down budgeting
d. bottom-up budgeting
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?
40
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.
Responsibility accounting requires all of the following except
a. separate books of accounts to segregate controllable and non-controllable costs
41 b. identification of responsibility centers
c. distinction between controllable and non-controllable costs
d. coding structure for responsibility centers
Information loses this qualitative characteristic if it is not reported on a timely basis.
a. Relevance
42
b. Reliability
c. Neutrality
d. Materiality
43 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.
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?
44 a. Reliability
b. Substance over Form
c. Faithful representation
d. Prudenc
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
45
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.

III. ANALYSIS / SITUATIONAL (10 pts.)

Direction: Write the letter of the correct/best answer on your answer sheet. Strictly no erasures.
Use capital letters only.

SCENARIO:
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 Disbursements by government entities are most commonly made through
a. MDS Checks
b. Cash
c. Petty Cash Fund
d. Credit Card
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