ANSWER KEY CHAPTER 1 AND CHAPTER 2 QUIZ

QUIZ DATE: 9/19/2020

CHAPTER 1
True or False

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.
2. Taxes are the main source of funds of the government.
3. Other sources of funds of the government include fees, borrowings, and grants
from other governments and international bodies.
4. Currently, the financial reporting of government entities is based NGAS.
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.
6. The principles in the GAM for NGAS are similar to the principles in the PFRSs.
7. The GAM for NGAS is promulgated by the Philippine Congress under the authority

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conferred to it under the Philippine Constitution.
8. A unique financial reporting requirement of government entities is the use of fund

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cluster accounting. Under fund cluster accounting, separate books and reports are
prepared for each type of fund held by a government entity.

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9. The GAM for NGAS is promulgated primarily to harmonize government accounting
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standards with the U.S. GAAP.
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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.
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ANSWERS:
1. TRUE
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2. TRUE
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3. TRUE
4. FALSE
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5. FALSE
6. TRUE
7. FALSE
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8. TRUE
9. FALSE
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10. FALSE
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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.

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 2. What is the legal basis of the COA in promulgating the GAM for NGAS?
a. P.D No. 1445, State Audit code of the Philippines
b. The Philippine Constitution
c. R.A. 9298, The Philippine Accountancy Act of 2004
d. Philippine Public Sector Accounting Standards (PPSAS)

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
disbursements thereof.

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d. Directly implementing the projects of the government.

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5. According to the GAM for NGAS, the basis of accounting to be applies by
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government entities is the

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a. Cash basis
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b. Accrual basis
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c. Modified accrual basis

d. Any of these as a policy choice
o

6. Government resources must be utilized efficiently and effectively in accordance

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with the law. According to P.D. No. 1445, who is directly responsible in
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implementing this policy?

a. All employees who are entrusted with the possession of government
resources.
y

b. The head of the government agency.

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c. The COA.
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d. All elected officials.

7. The transfer of government funds from one officer to another requires the prior
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authorization of the
a. Commission on Audit
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b. Head of the Agency

c. The President of the Republic of the Philippines
d. Bureau of Treasury
sh

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.

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 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 after 30 days.
b. Mr. C should immediately notify the COA within 30 days.
c. Mr. C should immediately notify the 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

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12. Which of the following qualitative characteristics does an entity most likely would

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need to make some trade-offs?

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a. Faithful representation and substance over form
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b. Materiality and relevance

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c. Relevance and reliability
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d. Understandability and comparability
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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
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the entity?
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a. Reliability
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b. Substance over form

c. Faithful representation
d. Prudence
y
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14. Which of the following is not one of the fund clusters of a government entity?
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a. Regular agency fund

b. Foreign Assisted Projects Fund
c. Special Account – Locally funded/domestic grants fund
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d. Business related funds

e. Petty cash fund
Th

15. To provide a proper balance between relevance and reliability, the overriding
consideration is
a. How users’ needs are best satisfied.
sh

b. Relevance is always more important than reliability.

c. Reliability is always more important than relevance.
d. Greater weight shall be given to relevance compared to reliability.

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 CHAPTER 2
TRUE OR 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.
2. An entity prepares its budget by simply rolling-over the budget in the previous
year-end and adjusting each line item by 10% increment to reflect inflation. This
process is described as zero-based budgeting.
3. After the budget call from the DBM, the proposed budget of various agencies are
submitted immediately to the office of the President for review.
4. An entity can incur obligations after receiving notice of its appropriation but
before receiving allotment.
5. Budget deliberation in the Congress start in the House of Senate.
6. A government entity must first receive and allotment before it can incur
obligation.
7. A government entity can make disbursements even before it can incur
obligations.

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8. Appropriation is also called obligational authority.
9. The Notice of Cash Allocation (NCA) is an authority issued by the DBM to

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central, regional and provincial offices and operating units to cover their cash
requirements.

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10. Responsibility accounting greatly enhances budget accountability because
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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.
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ANSWERS:
1. FALSE
y

2. FALSE
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3. FALSE
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4. FALSE
5. FALSE
6. TRUE
7. FALSE
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8. FALSE
Th

9. TRUE
10. TRUE
sh

MULTIPLE CHOICE
1. Which of the following does not properly describe the budget process used in the
Philippines?
a. Bottom up budgeting
b. Top down budgeting
c. Zero based budgeting
d. Non-incremental budgeting

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 2. This type of budget is prepared in such a way that estimated revenues exceed
estimated expenditures.
a. Balanced budget
b. Excess budget
c. Obligations budget
d. Budget meal

3. This summarizes 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 yet due and demandable.
a. Budget Execution Document (BEDs)
b. Special Allotment Release Order
c. Statement of approved Budget, Utilizations, Disbursements and Balances
d. Aging of Due and Demandable obligations

4. It is an authorization issued by the DBM to NGAS to incur obligations. It us

referred to as Obligational Authority.
a. Appropriation
b. Allotment

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c. Budget Call

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d. Budget Hearings eH w
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5. It refers to the amount contracted by a duly authorized administrative officer for
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which the government is held liable.
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a. Appropriation
b. Allotment
c. Obligation
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d. Budget Hearings
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6. 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
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specified purposes.
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b. It is a form of authorization to a government agency to incur obligations on

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behalf of the government.

c. It is a form of authorization to a government agency to make disbursement
out of government funds.
d. It is a notice received from the Congress that cash is allocated for the
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payment of planned expenditures.

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7. Disbursements by government entities are most commonly made through

a. MDS checks
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b. Cash
c. Petty cash fund
d. Credit card

8. 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

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 PROBLEM SOLVING
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 received 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

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b. Commission on Audit

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c. Bureau of Treasury

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d. Congress eH w
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3. The P45B authorization is referred to a
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a. Allotment
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b. Appropriation
c. Obligation
d. Sub-allotment
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4. The P45B authorization is received by Entity A from

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a. Department of Budget and Management

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

a. Allotment
b. Obligation authority (e.g. Notice of Cash Allocation)
c. Disbursement Authority (e.g., Notice of Cash Allocation)
d. Disbursement Authority (e.g., Notice of Transfer Allocation)

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

a. Department of Budget and Management
b. Commission on Audit
c. Bureau of Treasury
d. Congress

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 8. The half of the P15B monthly amortizations 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

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

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c. P10B

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d. P15B eH w
11. In Entity A’s first quarter Statement of Appropriations, Allotments, Obligations,

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