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Questions and Answers
How would Entity A recognize revenue from sales of medicines in the pharmacy?
How would Entity A recognize revenue from sales of medicines in the pharmacy?
- On a straight-line basis
- By reference to the stage of completion at the reporting date
- Upon billing, when goods are transferred to the buyer (correct)
- In accordance with the substance of the relevant agreement
What type of asset would not be included in the inventories of a government entity?
What type of asset would not be included in the inventories of a government entity?
- Rice and other welfare goods held for distribution
- Accountable forms
- Equipment costing ₱15,000 (correct)
- Raw materials and work-in-process
How should Entity A account for cash paid or received in an exchange of an item of PPE with Entity B?
How should Entity A account for cash paid or received in an exchange of an item of PPE with Entity B?
- Add the cash received to the initial measurement of the asset received
- Deduct the cash paid from the initial measurement of the asset received
- Add the cash paid to the initial measurement of the asset received
- Account for any cash paid or received in gain or loss (correct)
What type of assets are intended to be preserved for future generations?
What type of assets are intended to be preserved for future generations?
What is the initial measurement of the intangible asset acquired by the government entity?
What is the initial measurement of the intangible asset acquired by the government entity?
What is the useful life of the intangible asset acquired by the government entity?
What is the useful life of the intangible asset acquired by the government entity?
How would the government entity account for the intangible asset over its useful life?
How would the government entity account for the intangible asset over its useful life?
What is the primary focus of the statement of cash flows for government entities?
What is the primary focus of the statement of cash flows for government entities?
What is the basis for classifying leases under the GAM for NGAs?
What is the basis for classifying leases under the GAM for NGAs?
Which of the following would most likely indicate a substantial transfer of risks and rewards incidental to ownership of an asset?
Which of the following would most likely indicate a substantial transfer of risks and rewards incidental to ownership of an asset?
How would 'net assets released from restrictions' be shown on the statement of activities for a private not-for-profit institution?
How would 'net assets released from restrictions' be shown on the statement of activities for a private not-for-profit institution?
What is the primary focus of disclosure of events after the reporting date?
What is the primary focus of disclosure of events after the reporting date?
What is the primary purpose of impairment requirements and reversals thereof for noncurrent assets?
What is the primary purpose of impairment requirements and reversals thereof for noncurrent assets?
What is the primary focus of the classification of leases under the GAM for NGAs?
What is the primary focus of the classification of leases under the GAM for NGAs?
What is the primary purpose of the statement of cash flows for government entities?
What is the primary purpose of the statement of cash flows for government entities?
What is the recoverable amount of the asset at the end of Year 3?
What is the recoverable amount of the asset at the end of Year 3?
How much is the impairment loss at the end of Year 3?
How much is the impairment loss at the end of Year 3?
What is the gain on the reversal of the impairment loss at the end of Year 6?
What is the gain on the reversal of the impairment loss at the end of Year 6?
What is the amount of rental revenue that should be recognized by Entity A in its 20x4 statement of financial performance?
What is the amount of rental revenue that should be recognized by Entity A in its 20x4 statement of financial performance?
How should changes in accounting policies be accounted for by government entities?
How should changes in accounting policies be accounted for by government entities?
What is the carrying amount of the asset after the impairment loss at the end of Year 3?
What is the carrying amount of the asset after the impairment loss at the end of Year 3?
What is the value in use of the asset at the end of Year 3?
What is the value in use of the asset at the end of Year 3?
What is the lease term of the machine leased by Entity B?
What is the lease term of the machine leased by Entity B?
What is the total gain from the change in FVLCS during the period?
What is the total gain from the change in FVLCS during the period?
What is the interest rate implicit in the lease?
What is the interest rate implicit in the lease?
What shape would the graph of periodic interest expenses recognized on bonds issued at a premium show?
What shape would the graph of periodic interest expenses recognized on bonds issued at a premium show?
Which of the following information is not reported in the statement of changes in net assets/equity?
Which of the following information is not reported in the statement of changes in net assets/equity?
What is the cost of buying the machine?
What is the cost of buying the machine?
What is the total amount of lease payments?
What is the total amount of lease payments?
What is the present value of the lease payments?
What is the present value of the lease payments?
Which of the following is not one of the special journals prescribed by the GAM for NGAs?
Which of the following is not one of the special journals prescribed by the GAM for NGAs?
What is the reason for the imposition of customs duties?
What is the reason for the imposition of customs duties?
What is the effect of impairment loss on an amount already recognized as revenue on a government entity's statement of financial performance?
What is the effect of impairment loss on an amount already recognized as revenue on a government entity's statement of financial performance?
What is the purpose of the Notice of Cash Allocation (NCA) issued by the DBM?
What is the purpose of the Notice of Cash Allocation (NCA) issued by the DBM?
What is the benefit of responsibility accounting?
What is the benefit of responsibility accounting?
What is the relationship between accounting records and budget registries?
What is the relationship between accounting records and budget registries?
What is another term for appropriation?
What is another term for appropriation?
Study Notes
Inventory Classification
- Inventory Held for Distribution, Inventory Held for Long-term Use, and Inventory Held for Consumption are classifications of inventory held by a government entity.
- Semi-Expendable Property is not a classification of inventory held by a government entity.
Revenue Recognition
- Revenue from sales of medicines in a pharmacy is recognized when goods are transferred to the buyer.
- Revenue recognition is based on the substance of the relevant agreement, which requires an in-depth analysis by a CPA.
Property, Plant, and Equipment (PPE)
- When Entity A exchanges an item of PPE with Entity B, any cash paid or received from the exchange is added to or deducted from the initial measurement of the asset received.
Cultural, Historical, and Environmental Assets
- Heritage assets are assets that have historical, cultural, and environmental significance, and are intended to be preserved for future generations.
Intangible Assets
- Impairment loss on an intangible asset is the difference between the asset's carrying amount and its recoverable amount.
- Recoverable amount is the higher of an asset's fair value less costs to sell and its value in use.
Lease Agreements
- Lease agreements may include a lease bonus and a security deposit, which are accounted for separately.
- Rental revenue is recognized over the lease term.
Financial Statements
- Changes in accounting policies may be accounted for by prospective application.
- Non-adjusting events are never recognized but are always disclosed.
- Prior period errors are corrected by retrospective application.
Statement of Cash Flows
- The statement of cash flows shows the historical changes in cash and cash equivalents.
Classification of Leases
- The classification of leases under the GAM for NGAs is based on the extent of transfer of risks and rewards incidental to ownership of the leased asset from the lessor to the lessee.
Risks and Rewards
- A substantial transfer of risks and rewards incidental to ownership of an asset indicates a finance lease.
Net Assets Released from Restrictions
- Net assets released from restrictions are shown under revenues, gains, and other support on the statement of activities for a private not-for-profit institution.
Fair Value of Cash and Cash Equivalents
- The total gain from the change in fair value of cash and cash equivalents is calculated as the difference between the ending and beginning fair values.
Interest Rate
- The interest rate implicit in a lease can be approximately calculated using the present value of cash flows.
Periodic Interest Expenses
- The periodic interest expenses recognized on bonds issued at a premium will show a downward sloping line when plotted on a graph.
Statement of Changes in Net Assets/Equity
- The effects of current period errors, surplus or deficit for the period, and items of revenue and expense that are recognized directly in equity are reported in the statement of changes in net assets/equity.
Special Journals
- The Sales Journal, Cash Disbursements Journal, and other special journals are prescribed by the GAM for NGAs.
Government Entity Reporting
- The receipt of a pledge, donation in the form of services in kind, or repayment of a loan payable being forgiven may result in an increase or decrease in the revenue reported by a government entity in its statement of financial performance.
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Description
This quiz covers accounting principles related to revenue recognition and inventory classification. Test your knowledge of accounting concepts and principles.
