GOVERNMENT ACCOUNTING would most certainly be caused by a

SEMI-FINAL EXAMINATION a. Credit memo c. Deposits in transit

TRUE/FALSE b. Debit memo d. Outstanding checks
1. According to GAM for NGAs, all financial
assets shall be initially measured at fair 3. Which of the following does not qualify as
value plus transaction costs. FALSE cash equivalent for a government entity?
2. No journal entry is prepared when a a. Money market placement with an
disbursement is made out of the petty cash original term of 1 year but matures
fund. TRU within 3 months after the reporting
3. The PCF of a government entity is date.
replenished when disbursements reach at b. Money market placement with an
least 90%, or as needed. FALSE original term of 3 months.
4. According to the GAM for NGAs, all financial c. Temporary investments in stocks that are
assets are initially measured at fair value. expected to be sold within 1 month after
FALSE the reporting date.
5. According to the GAM for NGAs, d. All of these qualify as cash equivalents.
government entities shall prepare bank
reconciliations only at year-end or 4. Entity A estimates a risk of loss on a
whenever the need arises. FALSE recognized asset at 20%. However, Entity A
6. Only debt instruments with remaining can only accept a risk of 5%.
maturity of 3 months or less can qualify as Entity A then enters into a forward contract
cash equivalents. FALSE (the bond coverage to offset the excess risk of 15%. This process
shall not be less than the cash is best described as
accountability.) a. Risk management
7. A government entity established a P30, 000 b. Forward hedging
petty cash fund. The custodian must be c. Hedge accounting
bonded for at least P5, 000. FALSE d. Process risk hedge
8. Transaction costs on financial assets
classified under the held to maturity
5. Which of the following may not be included
category are expensed outright. FALSE
9. A derivative derives its value from the as part of cash in the note disclosures?
changes in value of a specified rate, price, a. Post-dated checks drawn
event or some other variable. TRUE b. Unreplenished petty cash fund consisting
10. Risk management is the process of of only the coins and currencies held as
identifying the desired level of risk, at the reporting date
identifying the actual level of risk and c. Issued checks that were cancelled
altering the latter to equal the former. TRUE because they became stale
d. Treasury bills acquired 3 months before
MULTIPLE CHOICE maturity date
1. It is a report that is prepared for the
6. The entry to record a disbursement from the
purpose of bringing the balances of cash
petty cash fund is
per records and per bank statement into
agreement. a. Expense accounts
a. bank reconciliation statement Cash-modified xxx
b. bank statement disbursement
c. bank balance report system
d. all of these (MDS), Regular
xxx
b. Expense accounts
2. If the unadjusted balance of cash per
xxx
bank statement is greater than the
Petty Cash
adjusted balance and there no other
xxx
reconciling items or errors, the difference
c. Expense accounts
 xxx b. Hedge of a recognized asset or liability
Cash- c. Cash flow hedge
Collecting Officers xxx d. Hedge of a net investment in a foreign
d. Expense accounts operation
xxx #2
Cash- Solution:
Treasury/Agency xxx Per bank, end. 100
Deposit, Regular Add: DIT
Less: OC (20)
e. None of these Adjusted balance 80
11. Which of the following is not
7. According to the GAM for NGAs, government considered a financial asset?
entities shall prepare bank reconciliations ANS: Prepaid assets
a. on a daily basis 12. A cash shortage of a government entity is
b. on a monthly basis most likely recorded as a?
c. only at year-end ANS: Debit to a receivable account
d. only as needed 13. Dishonoured checks are
recorded by a government
8. Which of the following statements is entity as?
incorrect regarding the accounting for ANS: Other Receivables
unreleased checks by a government entity? 14. The entry to record the replenishment of a
a. Unreleased checks are reverted back to petty cash fund of a government entity is
cash. ANS: (Debit) Expense accounts
b. Unreleased checks are physically (Credit) Cash- Modified Disbursement
cancelled. System (MDS), Regular
c. The accounting procedures for
15. Under this method of bank
unreleased checks prescribed under
reconciliation statement preparation,
the GAM for NGAs apply only to
the unadjusted book and bank balances
commercial checks.
are brought to an adjusted balance that
d. At the start of the year, a reversing entry
is reported on the statement of financial
is made for the unreleased checks in the
position.
previous year.
ANS: Adjusted Balance Method
16. Which of the following may be paid
9. All of the following may cause the
through the petty cash fund of government
cancellation of a check drawn by a
entity?
government entity except
ANS: Pantry Supplies worth P15,000
a. The check becomes stale.
b. Wrong spelling or unnecessary markings 17. Entity A maintains a petty cash fund. At any
on the check. given point of time, the cash on hand and
c. The check is dishonoured. the petty cash vouchers must be equal to
d. The check is prepared using a pen with the ledger balance of the petty cash fund. If
red ink. these are not equal, the difference is either
shortage or overage. This system of
handling petty cash fund is called
10. It is a hedge of the exposure to changes in
ANS: Imprest System
fair value of a recognized asset or liability or
an unrecognized firm commitment, or an
identified portion of such an asset, liability
18. According to the GAM for
or firm commitment, that is attributable to
NGAs, the establishment of a
a particular risk and could affect surplus or
petty cash fund
deficit.
a. Fair value hedge
 ANS: Requires the approval of the Head of much is the interest income in 20x1?
Agency ANS: 221,580
19. The “Loans Receivable” account is most 28. According to the GAM for NGAs,
likely to be used in the books of accounts changes in fair value of investments
of which of the following government classified as available for sale financial
agencies? assets are
ANS: BTr ANS: Recognized in net assets
20. Which of the following is not one of 29. Entity A acquires an investment for
the characteristics of a derivative? P100,000 and incurs transaction costs of
ANS: It requires no notional amount P10,000. At year- end, the fair value of
(or only a very minimal notional the investment is P80,000. Entity A
amount) recognized a P30,000 loss from the
21. According to the GAM for NGAs, these refer change in fair value. The investment
to incremental costs that are directly would most likely to have been classified
attributable to the acquisition, issue, or under which of the following categories of
disposal of a financial instrument. financial assets?
ANS: Transaction costs ANS: Available-for-sale financial assets
22. Which of the following is not one of the
categories of financial assets under the GAM 30. Entity A acquires an investment for
for NGAs? P100,000 and incurs transaction costs of
ANS: Financial asset through other P10,000. At year- end, the fair value of the
comprehensive income investment is P120,000. However, the
23. Entity A acquires an investment for investment is appropriately reported in
P1,000,000. Transaction costs amount to the year-end statement of financial
P10,000. At year- end, the investment has a position at a carrying amount of P106,382.
fair value of P900,000. If the investment is The investment would most likely to have
classified as financial assets through surplus been classified under which of the
or deficit, how much is the loss from the following categories of financial assets?
change in fair value? ANS: Held-to-maturity investments
ANS: 0 31. According to the GAM for NGAs, a
government entity’s cash comprises all
On January 1, 20x1, Entity A acquires 10-year, 10%, of the following except.
P2,000,000 face amount bonds for P1,456,792 ANS:Cash equivalents
and classifies them as held-to- maturity 32. Which of the following is excluded from
investments. Transaction costs on the the amount of cash that is reported in
acquisition amount to P125,919. The issuer the statement of financial position of a
pays annual interest every December 31. The government entity?
effective interest rate is 14%. ANS: Post-dated checks received
33. An unexplained cash overage of a
24. The initial carrying amount of the investment government entity is recorded as a
on January 1, 20x1 is ANS: Credit to miscellaneous income
ANS: 1,456,792 account
25. The interest income in 20x1 is 34. All of the following are
ANS: 221,580 considered internal controls
26. If the investment is classified as available for over cash except
sale financial asset and the fair value at year- ANS: Maintaining the petty
end is P1, 800,000, how much is the gain cash fund under a fluctuating
(loss) from the change in fair value? balance system wherein the
ANS: 238,869 total cash on hand and petty
27. If the investment is classified as cash vouchers may or may not
available for sale financial asset, how 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
ANS: P15,000
36. A government agency shall prepare a
bank reconciliation for each bank account
maintained. Bank reconciliations are
prepared using the
ANS: 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
ANS:Debit Memo
38.According to the GAM for NGAs, receivables
are measured at
ANS: (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
ANS: Net assets or equity
40.According to the GAM for NGAs, the
very purpose of derivatives is
ANS: Risk management