Answers to Multiple Choice Government Accounting

Answers to Multiple Choice (Chapter 1) 1. C This is the definition of government accounting pursuant to Section 109 of PD 1445. 2. D The government offices charged with the government accounting responsibility are: a. Commission on Audit b. Department of Budget and Management c. Bureau of Treasury d. National Government Agencies 3. A Under the Revised Administrative Code, the Bureau of Treasury, as one of the operating bureaus of the Department of Finance is authorized to: 1. Receive and keep national funds, manage and control the disbursements thereof; and 2. Maintain accounts of financial transactions of all national government offices, agencies and instrumentalities. 4. B The Commission on Audit based on the authority granted under Section 2(2), Article IX-D of the 1987 Constitution of the Republic of the Philippines prescribed the New Government Accounting System. 5. C The books of accounts under the new accounting system shall be consist of (1.) records for recording transactions in chronological order, known as journals; and (2.) records for classifying and summarizing effects of the transactions on individual accounts, known as ledgers. Letter “a” is incorrect because Regular Agency and National Government books are the two sets of accounting books of the government agencies. 6. D The following are the systems used under the NGAS: commercial accounting, Double-entry bookkeeping, and responsibility accounting. 7.

A Under the NGAS, the only basis of accounting is modified accrual. While, under the old system, the basis of accounting are: cash basis for tax, grants and borrowings; accrual for operating income; and obligations accounting for expenses and disbursements.

8. A A new chart of accounts and coding structure with a three-digit account numbering system (as compared with the previous codes of six-digits) shall be adopted. Accounts titles have been changed and some titles have been added.

In order to be effective in identifying the performance of a segment or unit of the agency under the control and responsibility of the segment’s manager, the coding structure has been formulated as follows:

000

00

000

000

000

Department/Agency/Province/City Responsibility Area (CO/RO) Sub-responsibility Area (District/Division) Sub-responsibility Area (Office/Unit/Program/Project) Account Code 9. D As a tool of the managers for decision-making, the accounting system must be able to provide the public manager the needed information. In addition to the public managers, there are other groups, who may need information from the accounting system. They are composed of the oversight agencies, creditors, officials and employees of the agency, taxpayers, donors and the public. 10. C The following are the objectives of NGAS: 1. The adoption of a system that is in conformity with International Accounting Standards; 2. Pursuit of eventual computerization, which will include responsibility accounting, thereby ensuring the generation of various reports that are useful to management, lawmakers and the general public; 3. Generation of relevant and periodic financial statements; and 4. Effective tool for managers and executives in effective and efficient monitoring of Agency performance. Moreover, to become an effective tool to managers and other users, the system must be understood even by those who have no technical knowledge of accounting; thus, the need to simplify government accounting. 11. A Special Purpose Fund is a fund appropriated for purposes other than those provided in the regular funds of government agencies, such as: 1. Miscellaneous Personnel Fund – which is used to cover personnel benefits which are not provided for in the regular budget of the agency. 2. Calamity Fund – which is used to cover relief, rehabilitation, reconstruction and other services in connection with calamities that may occur during the budget year. 3. Organizational Adjustment Fund – which is used to cover budgetary requirements of a newly created organization, program/project/activity within an agency. 12. D The books of original entries such as: Journal of Collections and Deposits, Journal of Disbursements, Journal of Checks Issued, Journal and Analysis of Obligations, and Journal of Bills Rendered shall no longer be used. Only the General Journal shall be used.

13. A The books of original entry or journals, shall be used to record in time sequence, financial transactions and information presented in duly certified and approved accounting documents. The basis for recording in the journals shall be the Journal Entry Voucher (JEV). 14. C Regular Agency books consist of Cash Receipt Journal, Cash Disbursements Journal, Check Disbursements Journal, General Journal, General Ledger and Subsidiary Ledgers. Cash Journal is a National Government (NG) book. 15. C The receipt of Notice of Cash Allocation is recorded in the Regular Agency books representing the agency’s subsidy from the national government. 16. C Serviceable assets no longer used shall be reclassified to the “Other Assets” account and shall not be subject to depreciation. Also included under the “Other Assets” account are obsolete and unserviceable assets awaiting final disposition. 17. D

Under the New Government Accounting System, The Bureau of Treasury shall maintain the Registry of NCA and Replenishment for control and monitoring of NCA released by DBM. In addition, it shall monitor bank transfers it makes in replenishing its MDS account.

Answers to Multiple Choice (Chapter 2) 1. B This is the definition of budgetary accounting. 2. D The national budgetary system consists of methods and practices of the government for planning, programming and budgeting. Its primary concern is the availability and use of money to provide the necessary services expected of the government. 3. C The national government budget is a statement of estimated receipts based on existing and proposed revenue measures, and of estimated expenses, which serves as the basis for a general appropriation bill. 4. A Pursuant to Sec. 22, Article VII of the Philippine Constitution, the President of the Philippines shall submit to Congress within 30 days from the opening of every regular session, as the basis of the general appropriation bill, a budget of expenditures and sources of financing, including receipts from existing and proposed revenue measure. 5. B This phase of budget process/cycle involves the review and approval of the budget by the legislative and the formulation of an appropriation bill. 6. C This phase of budget process/cycle involves the implementation of the budget by different government agencies. 7. B This phase of budget process/cycle involves the comparison of performance with predetermined plans. The expenditures and performance are evaluated. 8.

D This is pursuant to Sec. 29(1), Article VI of the 1987 Constitution.

9. A Pursuant to Sec. 2(1), Bk VI, 1987 Adm. Code, appropriations refers to an authorization made by law or other legislative enactment, directing the payment of goods and services out of government funds under specified conditions or for special purposes. 10. C This is the definition of allotment. 11. A This is the definition of obligation.

12. A This is the definition of program. 13. A Under the new accounting system, government agencies/units shall now journalize the receipt of Notice of Cash Allocation using this journal entry. Likewise, the accountant of government agency shall credit “Cash – National Treasury, MDS” each time payment is made charged against the Notice of Cash Allocation. 14. A Although the agency will not journalize its appropriation and allotment received, it shall maintain four registries for the allotment it receives and for the obligation it incurs, such as: a. Registry of Allotment and Obligation – Capital Outlay (RAOCO) b. Registry of Allotment and Obligation – Personal Services (RAOPS) c. Registry of Allotment and Obligation – Maintenance and Other Operating Expenses (RAOMO) d. Registry of Allotment and Obligation – Financial Expenses (RAOFE) 15. A The Allotment Release Order is a formal document issued by the Department of Budget and Management to the head of the agency containing the authorization, conditions and amount of an agency allocation. The document may be the Agency Budget Matrix (ABM), where the amount of allocation not needing clearance is indicated, or the Special Allotment Release Order (SARO), where the release of which is subject to compliance with specific laws or regulations or is subject to separate approval or clearance by competent authority. 16. D The accounts personal services include basic pay, all authorized allowances, bonus, cash gifts, incentives and other personnel benefits of official and employees of the government. Telephone charge, Rent, and Meal allowance for overtime work are incorrect because these are maintenance and other operating expenses. 17. C Purchase and/or construction of fixed assets such as building and structures, land, land improvements, equipment, etc. are charged against the capital outlay. Salaries and wages account is incorrect because this is personal service. Repairs and maintenance is incorrect because this is maintenance and other operating expense. Merchandise inventory is incorrect because this is current asset. 18. C Budget Execution Documents is the annual documents required by the DBM at the onset of the budget execution phase, which contain the following: 1.) Physical and Financial Plan, 2.)

Monthly Cash Program, 3.) Estimate of Monthly Income, and 4.) List of Not Yet Due and Demandable Obligations. 19.

A Physical and Financial Plan is a budget execution document that serves as overall plant of the government agencies encompassing the physical and financial aspects, consistent with their approved budget level for the year, broken down by quarter.

20. D Statement of Allotment, Obligations and Balances is a budget accountability report which serve as the agencies’ summary report of allotments received and corresponding obligations incurred during the month from all sources by object of expenditure, and shall be reported on monthly basis. Monthly cash program, list not yet due and demandable obligations, and estimate of monthly income are budget execution documents. 21. B Notice of Cash Allocation (NCA) is a disbursement authority use for payment of personal services, maintenance and other operating expenses, capital outlay, financial expenses, foreign assisted projects, and prior years/current years’ accounts payable. 22. C Under NBC 507 dated January 31, 2007, government agencies are required to submit to the DBM on or before April 15, 2007 their plans, programs and targets for the year using the budget execution documents. 23. C Appropriations shall be available for release and obligation one year after the end of the year it was appropriated with the exception of personal services, which shall lapse at the end of the year. Thus, request for realignment of released allotments under the prior year budget shall be requested until June 30 of the current year so as to provide agencies with sufficient time to implement project/activities covered by said realignment. 24. C All NCAs programmed and credited for the month whether part of the comprehensive release or constituting the additional NCA releases, shall be valid only until the last working day of the said month, and not at the end of the fiscal year. 25. D All SAROs issued chargeable against the GAA, as re-enacted shall be valid for obligation while the new GAA is not yet in effect. The effective date of the new GAA is fifteen days after the President signs the GAA into law. 26. C The obligational authorities for agencies to enter into commitments or incur obligations during the year shall be issued comprehensively through the Agency Budget Matrix (ABM) and through issuance of SAROs. On the other hand, the disbursement authorities for agencies

to pay the goods/services delivered and projects completed shall be through issuance of Notice of Cash Allocation (NCA), Non-cash Availment Authority (NCAA), and Cash Disbursement Ceiling (CDC). 27. B Appropriation for GAA, R.A. 9524 shall be valid for two years with the exception of personal services, which shall lapse at the end of the current year. 28. C Line item budget is a budget the basis of which are the objects of expenditures such as: salaries and wages, travelling expenses, freight, supplies and materials, equipment, etc. 29. B Special budget is a budget of special nature and generally submitted in special forms on account that itemization are not adequately provided in the Appropriation Act or that the amounts are not at all included in the Appropriation Act. 30. C The budget preparation begins with the issuance of a “Budget Call” by the DBM. This document outlines the priority areas of government activity applicable to the budget year, which begins a year and one month hence. 31. B Janitorial services account is a professional service under Maintenance and Other Operating Expenses. 32. B All NCAs programmed and credited for the month whether part of the comprehensive release or constituting the additional NCA releases, shall be valid only until the last working day of the said month. Thus, any unutilized NCA corresponding to the book balance, net of the outstanding checks, shall automatically lapse at the end of that month.

Answers to Multiple Choice (Chapter 3) 1. B Refer to answer to question #5 p.23. 2. D Under the new accounting system, receivable account will continue to be reflected in the books at gross amount, although portion of this may have already been ascertained to be no longer collectible; thus, for fair reporting of receivable, the account allowance for doubtful accounts shall be used.

3. B Guarantee Deposit is used to record the amount of cash deposits, subject to refund, made to secure or guaranty compliance with certain requirements in a transactions and presented as other current asset. Other prepaid expenses, Deposits on letter of credit, and Advances to contractors are incorrect because these are prepayments. 4. C Although allowance for bad debts and allowance for doubtful accounts may have the same meaning; based on COA standards/policies, it is the account allowance for doubtful accounts that shall be used. 5. D The account personal service includes basic pay, all authorized allowances, bonus, cash gifts, incentives and other personnel benefits of officials and employees of the government. On the other hand, travelling expense is included under maintenance and other operating expense account. 6. D COA Circular No. 2003-001 provides that other assets include work/other animals, breeding stock, items in transit, and art, archeological specimen and other exhibits. Specifically, construction in progress – agency asset is a capital outlay account. 7. C COA Circular No. 2003-001 provides that intra-agency payables include Due to Central Office, Due to Regional Offices/Staff Bureaus, Due to Operating Units, and Due to Other Funds. Specifically, Due to BIR, Due to LGUs, and Due to National Treasury are inter-agency payables. 8. A Pursuant to COA Circular No. 2003-001, the following are other liability accounts: Guarantee Deposits Payable, Currency Swap Payable, Performance/Bidders/Bail Bonds Payable, Tax Refund Payable and Other Payables. The account Interest Payable is classified as Payable account. 9. C Intermediate accounts include Cost of Goods Sold, Income and Expense Summary, Prior Years’ Adjustments, Retained Operating Surplus, Subsidy to Regional Offices/Staff Bureaus and Subsidy to Operating Units, among others. While government equity is the only equity account recognized in the revised chart of accounts under COA Circular No. 2003-001 dated January 17, 2003.

10. D Pursuant to COA Circular No. 2003-001, capital gain tax, donors tax, and professional tax are national taxes; while occupation tax is a local tax revenue. 11. D

Gain or loss accounts include Gain/Loss on FOREX, Gain/Loss on Sale of Disposed Assets, Gain/Loss on Sale of Securities, and Prior Years’ Adjustments. Specifically Miscellaneous Income is a General Income account. 12. D Bank charges, Documentary stamps expense, and Interest expense are Financial Expenses; while Loss of assets account is Maintenance and Other Operating Expenses. 13. A Pursuant to COA Circular No. 2003-001, Debt Service Subsidy to GOCCs account is Financial Expense; while Tax Refund, Bad Debts Expenses, and Miscellaneous Expenses are Maintenance and Other Operating Expenses.

14. D Per Circular No. 2003 – 001, the Revised Chart of Accounts, utility expenses include water expenses, electricity expenses, and cooking gas expenses. Postage and deliveries, internet expenses, and telephone expenses – landline or mobile are classified as communication expenses. 15. C The new standard chart of accounts of the NGAS no longer recognize Cash – Deposit. 16. B Due from National Treasury is specifically classified as Inter-agency receivable, and not included in the receivable account of the new standard chart of accounts. 17. D Per Circular No. 2003-001 of the Revised Chart of Accounts, subsidy income account is classified as general income. 18. A Per Circular No. 2003-001 of the Revised Chart of Accounts, the three digit code for asset is 100-299. 19. B In the new standard chart of accounts, Cash – Bangko Sentral ng Pilipinas may be classified as either Cash in Bank – Local Currency or Cash in Bank – Foreign Currency.