CPA REVIEW SCHOOL 0F THE F!

"{ILIPPIFIES
MANILA

PRACTICAL ACCOUNTING PROBLEMS

GUERRERO / GERMAN
SIY / DE JESUS / tIM / FERRER

NGAS & $.{ON.PROFIT ORGANIZATION

II

New Government Acco u ntinqr$vetelE

Bu,Jgeted accounts of appropriations and allotnrents are enterecj in tlte registry maintained
Oy OeU (Department of Budget ancJ ilIanagement). Allotments and obligations are entered
in the registry maintained hy the agency

The notice of cash allocation (NCA) receivecl hy the agelrlcy frcm the DBlvl is lournalized in
the regular agency books (RA books). The ctner set of books of an agency is the national
government books (NG books)for income items they are not authorized to tlse.

The obligations incurred by the agency

registry, as follows.
For Capital Outlay
Fersonal Services
Maintenance & Others
Frnancial Expenses

dr{,.;

hot jcurnafized, but posted to the appropriate

- RAOCO
- RAOPS

. F,AOMO
. RAOFH

Generallyr, withheld taxes by the agenciv afe no longer remitied tc BtR, but retained and
creciitecj to Subsidiary lncome from Naticnar Government (SING) under the Tax Remittance

Advrce (TRA) System. The NCA releasecl to the agency is reduced by the amount of
estimated withholding taxes pentinent tc the alictment uove;'ed bv the cash allocation
Asset/perpetual inventory method will be followed in the recording of expenditures if it
applies to more than one periocl rcr when payrnent is for rnaterials for stock. The expense is
taken up when the items are consurned.
Costs of assets being constructed are dehiied to coi-rstruction in progress account (using
construction period theory). This CIP account is closecl tn the eppropriate asset account
upon cornpletion.
Constructed Public lnfrastructures are not sl,own arficng tlre fixer: assets on the Statement
of Financial i)osition, rather they aie dedu;teC flEr;, ql!r;,n1llerr. equrity (as Oart of CloSing
entries) and transferred out tt: an appropr',ate regist:t
Deprecration on frxed assets are taken up on the nrcrnth fcllcrrv:ng the month of purchase or
completion of construction. A 1oo/o saiap value on tlie asset ir; always assumed and the
estimated life is prescribed by COA.

lncome for vvirich tne agency is authorizec to use for its c,pera';iot't is recortJed in the regular
agency books. lf the authority is wittr limitati,;rns, sircl-i a.i atil/ excr-si, is to be remitted to the
National Treasury the collections shall first be recorrlet; in the 'egular agency books, the
expensee joiirnalized, and the excess is io he renritteC io the lqationai Treasury and
recorded in the agency's NG hrooks.
Two trial balances are prepared:
a) Pre-closing trial balance whicfr is aiso the a,Jrustccj trial tralance from which the
slatement of incoirne arnd expense is prepareC.
b) Post-clrrsing trial halance fron, which the stateinsrit of financial position is
prepared.

AdjustinE etrtries at end of period are the sanle as those recoi'Jed in comniercial accounting

rhp.^74,C?

r
'r

Closing entries are similar to commercial accounting with some minor differences'

the NCA from

RECORDS OF THE BTR (Burearr of Treasury). upon receipt of the copy of
tt
(RENREP)
the DBIM, the BTR shatl enter it in the Regisiry of NCA and Replenishment
MDS
appropriate
shall also enter the transfer of cash tlom iti bank account(s) to the
account.
is
The obligation is recognized and will be entered in the appropriate nnp y!1 obligation
(ALOBS)
slips
obligation
incurred as evidenced-by the approved Allotment and

"Cash in the Treasury for

Uporr receipt of the NCA, the Accountant shall journalize it as
Modified Disbursement system (MDS)', and 'su'bsidy lncome from Natronal Government"
which in effect identifies the share, of the Agency in the income of the National Government'
made
The Accountant shall credit "Cash, National Treasury-MDS" each time a payment is
or
asset
paid
either
for,
being
charged against the NCA and debit the specific account
expense account.

Note that there is a new expense ciassification, the financial expenses. They are
categclzed separately from the MOOE since they are not operating expenses' lt shall
for
maintarn separate ,"gittry for leases from the Special Purpose Fund, the Registry
Special Purpose Funds Appropriation (RESPFA)'
and
The DBM shall maintain the Registrv of Allotrnent and NCA (RANCA) for the allotments
the
of
record
the NCA issued to the agency. ih" nnruCA shall be the control and monitoring
DBM, The DBM shall furnisn ihe Brireau of Treasury a copy of the NCA.

Not for Profil Orqaniz

FINANCIAL STA"1"IMENTS

NOT FOR

REOUIRED FOR PRIVATE

PROFIT

ORGANIz.,TIONS

1. Stiltenrenl of Financial Fosition

2. Staiemertt of A:tivities
3. Stateritent of Cash Flovus
4. Specific for Voluntarir [iealti'i and \Nelfare

Organizations

Statement of Functional

Expenses

Statement

of

Financial Posrtlon "- shows assets anci liabilities similar

to

commercial

accounting. Net assets are classifteci into.

1 Unrestricted - no donor imposed restrictions
Z l"emporarily restricted - with clonor imposed stipulations (expiration of time and
fulfillment of use restrictions)
3 pprrnanently restricted - u;ith donr:r impcsecl restrictions that do not expire nor can
be removed by I'IPO activitY.

Statement of Activities - show revenues, expenses, gains and losses aS well as

reclassification among the different types i:f net assets. The change in net assets for each
type is requirecl. Expeiises are requireci (reported) only in unrestricted net assets.

Staternent of Casir f:lows

Specific fuirtds us,.:o by not for S.rrcfit orgatrizations:

1. lJnrestricted frjnd - include ait ine resources that are available for use by authority of
the Roard of Directcrs (even thougl-r designatecl for specific purposes) and are not
restricteci by donors.
2 Restricted fund - accournts for assets available for current use but are not derived
from the operations of the NPO's. These assets are transferred to unrestricted funds
at the tirne the designated expenditure is made

similar tr: the Cash Flows prepared in commercial accounting

PAfl-74aq

Endowment fund
Permanent - PrinciPal is it: be rnaintaineii indefiru'ieiy in revenue providing
a. 'investments
b. Term - principal rnay b,e expended after passage ot a period of time
c. euasr- endowment - established by Boar"d of Llirectcrs under its control

4. Agency fund - used to account for assets held by I'lFll; as a custocian.

5. Others; like annuity funcJs, loss funds (for colteges) and plant funds
Revenues and gains come from own principal and auxiliary a*trvities or from donors.

Contributions - contributions of cash ancl other assets are recogl"lized when received and
credited to contributions revenue (Festncteij cr Unre*iricied). tlorrtribuied services and
facilities are recognized both as expenses anC contributiolts revenue$, net of expenses
Pleclges - unconditir:nal plectrges are reoognized as racei,rabies and ccntributions revenue
(reslircteci or unrestricte,f) nf propi"iate;r provi',icns frr,;',Jo"tbii'ul cled,;e':s f,re ai:;o to lre set up'
Expenses and losses

ali expenses cf th;; friF]0 are ;'ecr;gnizecl trr the: unr"ei;ti"icted fund

Expenses can be ciassified tnto.

a) Progranr - actrvities that result irt the clistribtlli6lr of g:t'c}; "l;rri services t* beneficiaries'
ali other activities othel than program fuitcl taising and rnembership
Supporting
deoreiol-rnent.

b)

qvE

Rr'N

EN

T Aq:O

NTI Flq

The Department of Health received ;1r". allot:re;ni frorn l]epartn]enl of Btidget and
Management for Capitai Outlay P2,:100,C00; Mai:ttenance ancl other Operating
Experises P740.000; and Personal Ser'.rices P'i,100,0r)0 Vl,ihat will he the entry of
the DQH in its regular aEency books upon receipts ol allctnrenl?

Cash - NationaiTreasury, MDS

Subsrdv lncome from National Gcvernmc:ni

Naitronal Clear:ng ,'\ccount

4,i 40,000
4,14CI,000

14r ,],00;',

4,14"0,*C0

Notice of Oash Allocatian

Z.

C.

Cash Collecting Cfficer

Cash in Bant: - LCCA

D.

h4emo Entry

..,'!,1{l,CCO

140,00C

The Departrnent of Foreign Affarrs issued plri"cf,as* or;i::r lr.' tl':e ar;qllisiiiorl of office
equipment costrng P1,920,00e . Tire (,(lr.iipnlenl v,i,:l3 1'1'"".;1,,,,ris.1 v'lith tl're charge
invoice and was Jrbsequentiv paiei bi,che.:r., aftet rvii.r:r'.)itl;il!l ia,'tes cf 107o The
DFA remitted the tax witnheld to Brirr:a- c':f lnterncil F',.i','e,ile lhrr.: an authorized
government depository lrank. Vdhat rs I'h"* e;"rtrv cf Dh-A ii ie(,-',ci tir* payment'/

':,!20

Accounts payable
Cash - Disbr-irsirig Offic;e,"
Due to EIR

(j'l)0

i, i 28.000
192,000

Office Equipment
Cash - Disbursirg Offic*i"
Due in Blfl

C.

Accounts payahrle
Due to BIR
Cash * Collecting Cftil;*r

I,3.

,il2:i

iJLIC)

1,728,000
192,000
u,ilrJ0

192,000
.-.'/

,,., .^ i'"t
*, 1,, -- t'.(!"{l i
i.)
i Ft r\v'

I 728.000

Accounts payable
Due to BIR
Cash - National TreasurY

1,920,000

192,000
1,728,000

MDS

of
Department of Public \A/orks and Highways transfers cash
was
The_project
project.
Park
p5,400,000 to Department of Tourism for a Peoples'
17, 2012 What
completed by the implementing agencyidepartment on December
of the project?
is the entry of source agency/department to recorrj the completion

on July 2s, 2A12,

5,400,000
5,400,000

A. Peoples' Park Project

Cash-Check Dtsbursements-MDS

5,400,000
5,400,000

Peoples' Park Pro.;ect -t

Cas h-irlational reasury-lvl DS

5,400,000
5,400,000

C. Peoples' Parl< Project

Duoo

fronr t'{i:tional Government- DOT

5,400,000
5,400,000

D. Peoples' Par"k Project

Due to National Government- DOT

4. The Depari:ment of Education

Corp'
signecl a construction contract with ABC Builders

of the contact
for the construction of Building, pz,soo,000. The agency paid 20%
from ABC
billing
first
its
price. After 6 months. the Depifiment of Education received
paid
the first
company
Builders ctorp. g0% of the contact prrce cn the 7il' month, the
on
department
the
of
entry
brllrng less P1 500 000 withholding tax \A/hat will be the
its books upon recelving the first billing?

Building
Accounts PaYable

6,750,000

Accounts PaVaPle
Cash National TreasurY
Due to BIR

6,750,000

C. Constructicn
Acclitnts

6,750,000

5,250,000
1,500,000

fu1DS

6,750,000

itr Progre$s
PaYable

5,250,000
1,500,000

Advances front contractors

6,750,000

D. Construction in Progress

1,500,000
5,250,000

Advances to contractors
Accounts PaYable

5,

tax by the
What is the entry to recorcl the collection of P3,250,000 corporate income
Bureau of lnternal Re';enue rn its national government books?

Cash NationalTreasurY MDS

lncome tax - CorPoration

Cash

3,2s0,000
3,250,000

3,250,000

C. Cash in bank -

LCCA
lncome tax - CorPoratien

3,250,000

D.

lncome tax - CorPoraiion

Cash * Disbursing offic'er

3,250,000

Collecting officer
lncome tax -- CorPoration

3,250,000

3,250,000

3,250,000

2*v4aq

6. The Department of Labor and Enrployrrrerrt recerveri an allotment from the

Department of Budget and Management amounting to P25,000,000 which is
accompanied by a notice of cash allocation of 90% of the aliotment. Lluring the year,
the agency incurred an obligation of 90% of the aiiocation but oniy 40% of these
obligation were paid by the agencv. 1"he entry to record the unused NC,{ is:

Subsidy lncome fronr l.Jational Governnient 12,150.C00

Cash - Nationai Treasury, ['lDS
12,150 000

Subsidy lncome from NG

Cash - NT, MDS

C.

Cash

D
7.

Cash

1rl 400,000
14,.400,000

NT, MDS
Subsidy lncome f:'crn

NG

NT, MDS}
Subsidy lncome fro:'rr

ttlG

:2

;bi) 0riC
1:j,15Q,C00

i4,400,000
14 400,000

The Department of Justice proviied travelling experise,s i{:-, cnc rf i'l,s oFficers, Mr.
Ping fcr an amount of P25,000. T'he travellinpj rxprsyls45 was ,;rrintt",cl to Iu4r. Ping
on February 1.2013. Subsequently fir PinE llaurlrJatrrci itc cash advance in the
amouni of P20,000. -Ihe excess lvere :elirr;red to DC,.l hy !',*r lrr,"'g
The entry to record the granttnq cf ca-qh actrvance tc

A.

Due from Officers and

cash

eriirlsyses
fLrlDS

C. Cash Disbursing officer

i:S,ilf"tfl

25,000

N-:-,

?.i:,i"\Qli

25,,10{l

?5,000

Mf':S

N"f,

D. Cash Collecting officer

Cash

Pingi ,vz:s.

t'lT,

Travelling expenses - local

Cash -- f\lT. f'-4Dg
Cash

I'lr

?'

COC

25,*0:l

t'4nS

25 000

8. The Department

of Social Welfare and tr)eveloprnerrt s ir[:ii$i;i:i.;n r:t re:nt fr.:i four

years arnounted to 375,000 The eritr-yr {e recorcj thlr: triensacricn wouif tr*:

A.

Prepaid

Rent
Cash

3'5 OCil

-N]",MI-;S

Memorandum Entry in RAOMO

C.

Rent

Expense
Cash

N1".

375 00C

3IS,000

MLrS

-1,21,000

D. Prepaid Rent

375,110J

Cash Disbr"rrsing Cfficer

9.

3,7",000

The Department of Trade and lndustry ,r;as grarrieri advtnces i'cr pav.oll amounting
to P1,5C)0,000 The entry woukJ he.

A.

Casl'i Disbursing

Cash _NT,

Officer
Payroll

MDS
Cash Drsbursing

^i,bC:,LC0

'i 5C0,00C
,!

Officer

50Ci (li){l

Memorandunr Entry in RACPS

D. Cash DisbursinE Officer

Cash -NT, MDS

aOC 00C

rle.i*7,4oq
1,50C,r.'t0il

1.53[t 000

(/

10.

Agency ABC collected cash of P2C0,00C for services rendered. The collectton was
deposited to PSBank. What is the entry to record the deposit?

A.

Cash in Bank -LCCA

Cash - Disbursing officer

Cash - NT
Cash

- MDS
-

Collecting

officer

Cash in Bank -LCCA

Cash - Collecting officer"

Cash-- NT
Cash

- MDS
- Disbursing officer

200,000
200,000
200,000
200,000
200,000
200,000
200,000
200,000

11. The entry to record brank charges of P10,000

A.

Bank

Charges
payable

10,000

Charges
Cash-NT-MDS

10,000

10,000

Accounts

B.
C.
D.

Bank

Bank Charges
Cash in Bank

10,000
10,000

- LCCA

Bank Charges
Cash Disbursing Officer

10,000
10,000
10,000

NON.PROFIT ORGANIZATIOH

1.

QPS Hospital had the following cash receipts and disbursements for the year ended
December 31 , 2013.

'

Collections from patients

Contributicn for an establishrnent of
term endowmt-ri:i
Tuition from nursing school
Interest received from investment in
permanent endowments
Dividends received from investment in
term endowments
Payment of supporting expenses
Payment of program expenses

P2,500,000
500,000
'1,000,000

17s,000
200,000
750,000
1,075,000

The interest recetved from perrnanent endowment is restricted by the donor for acquisition of
medical equipment.
How much is the net cash provided by operating activities?

A
B
c
D

P1,675,000

Pi,875,000
P2,050,000
P2,175,000

Px2^7@?

2.

NPC University, a private not-for-profit university, had the fcllowing r:ash inflows during
the year ended June 30, 2013.

/
,r

P4,000,000 from students for tuition.

P2,250,0C0 from a donor who stipulrrted tfrat the n:oney be invested indefinitely.
P1,4.00,000 from a donor who stipulated that the rnoney be spent in accor"dance with the
wishes of NPC's gcvernrng board.

On NP University's staternent r:f cash flcws for rhe yeai endec Jtlne 3ti, 20i3, lvhat arnount
of these cash flows should be reported as financing activitres?

A
B
c
D

P1,400 000
P3,650,000
P5.400,000
P2,25C,000

NGC College, a private noi-for-pr*fii cclle;e recei'aed p.i,8itC,C'00 from Dr. Wu on May
?-5,2Q1S. Or Wu stipuiated that his rc:-itributiofi |;e r.rseil to sLjpool-i facuity r"esearch and

bookwritingsemrnaisciuringthefiscaiyearbeglnningtin'i:'li'''';:a'ilonJuly15'2013'

adrninistrators of NGO Cc,llege awarCe,i seininar ai'id iraining grants totaiing P3,900,000
to several faculty mernbers in ai:corciarrce n'ith the wtshes or t:ltl tJorior.

Fo.'the )rear ended June,30,2013.

lriGCr College

sh:ultl

repCIrt

the

P4,800,000

contribution as

A
B

C.

Temporarily restrictecl revenuee on the siatemer:t rf acttvities

Unrestricted revenue on the staterrrent of activities
Temporarily restrictecl deferred re,renlre r,'n the ottt,rnlent c;f activtttes
An inc;'ease trr fun,J balar';ce cn th:: statet'rle:lt ii{ !i;r.t"lc;el 6.iu:hitinn

VPS College, a private not-fcr-prr:fit *r:ilege, re,.le:\ici:, tne fnlln'anng contributions during
201 3.

P3,125,000 from CHED for far:r.rlt3- aeadenric adi'.i,'icem#nls s,tar"ting acnciemic year

2C'14.

P625,000 from a donor who stipulated that tlre coririL,utien be l:lvi:ste:cj in perpetuity and
thatthe earnings be used for rencvation *f tfie nrain iiL;rery As r:t December 31,2013,
earnings from investrnent amountecl to Pli1,25li

For the year ended Decem'cer 31, ?t113, *,,!:ai anrilul'i c( ilts:se i.:*-,r;irrk)ut;ons should be
reported as temporarily restrictecl revenueE on tlre stal*inont of ;"rctlrritres?

A
B
c
D

P31,250
P3 156,250
P3,125,000
P3,781,250

'/KB hosprtal, a Not for profrt

hersprlat ai,:liairl{ i';iih a r*lr:J!(:

followirrg informatiorr for the year ended Decentbei ii1, l"il i3

Gross patient service renclered

Bad debts expense
Contractrral adjustments with thlrd partv piiyflr1
Charuty r:are
Courtesy allowances to hospitai oITrpl6rysr:u

Jf {irc',n I'}ported
':

12,000,000
?5C,000
t,cOc,000
750,000
'+5C,ilO0

Net patient service revenues fcr YKB hosp,t,;l for the )'sar srrl,jt){j Iierenrher 1]1, 2013 is

A
B
c
D

P 11,250,000
P10,550,000
P9,800,000
P9,550,000

PAli"-74"09

the

During 2013, ZT{i i-lospital purcl-rased medictnes for hospital use totaling P1,000,000.
lncluded in the P1,000,000 was an invoice of P100,000 that was canceled in 2013 by the
vendor becau,le the ,rendor wished to donate this medicine to ZTS. The donation should
be recorded a.,

A. An increase

of P100,000 to Fatient Service Revenue

Non - Operating Revenue
Revenue
Operating
to
Other
of
P100,00C
An
increase
C
Revenue
Operating
Non
Other
D. A decrease of P100,000 to
-

B. An increase of P100,000 to Other

Fund estiiblished at a puhrlic college by donors who have stipulated that the principal is
nonexpenciable, but that the income generated nray be expended by current operating
funds, would be accounteo for in the
Annuity fund
Temporarily restricted fund
Pure-endovr;ment fund
Current-f und restricted

B
D

Which of the {r'rllou.'ing is most likely to be classified as other operating revenue?

A.

Unrestricted gift

B. State rri.qerllcf-; 9l3ot

C. Dividerrri income
D. ParkinE fee
The statement of financia! position for JDS Library, a private nonprofit organization,
should repoft separate, amounts for the library's net assets according to which of the
following classlfications?

A.

Unrestricted and perrtanently restricted

B. Temporarily restriciect and permanently restricted

C. Unrestricted and tempcrarily restricted
D. Unrestricted, temporarily restricted, and permanently restricted

10. On the statement of activities for a private not-for-profit performing arts center, expenses
should be deducted from
Unres:tricted revenue
Temporarily restricted revenues
Pei"nt ".: nentii' i-r:siricted reven ues

il

ill

l, li anci ili
Both I and il

! only

li onili

11. OBT Museum, a private nonprofit organizatron, has both regular and term endowments.
On the rn'-i$eum's statement of financial position, how should the net assets of each type
of endornirient bc repr:,rted?

A.

!J
C
ti

Term Endowrnenis_
Temporarily restricteci
Permanentiy restricteti
Unrestricted
Temporarily restricted

lTe,eular Endowment
Permanently restricted
Permanently restricted
1-ern porarily restricted
Temporarily restricted

PkT-740q

oI
12 Revenue

frem room changes for telephone calls anC teievision croct':eds florn cafeterias,
gift shops and snack bars of not for proflt hosprtals are reccrded as:

A.

B
C
D

13.

Patient service revenue - Unrestricted

Resident Service revenue - Unrestricteci
Other operating revenue - Unrestricted
Non - operating revenue - Unrestricted

During the year ended December 31,2A13 a not for profit pedoi-ming arts entity received
the foliowing donor-restricted contributiort and investment income.

o
o

Cash contribution of P1,35C,000 to be permanently investeo.

Cash dividends and interest of P75,000 to be used fcrr the acquisition of theatre
equiprnent.

As a result of these cash receipts, the statenrent oi cash flcws for the year ended December
31,2013 would report an rnrrease of

A.

B
C
D

P1,425,000 frcm operating actrv,ities

P1,425,000 fr..:nr finarrctng activtties
P75 000 from operatrrrg activltles and arr inerease e'i P'1,350,000 from financing
activities
F1,350,000 from operating activiiies and an lnoreese of P75,urO0 from financing
activities

"end

CIf

handouts-

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