Chapter 8 – Trial Balance, Financial Reports Statement

1. Explain briefly the financial reporting system.

Answer: Financial Reporting System is the process of producing financial statements that disclose an
organization’s financial status to government.

2. Define trial balance. Enumerate the purposes behind the preparation of the trial balance.

Answer: Trial balance is a listing of general ledger accounts with their corresponding debit and credit
balance. The purposes of trial balance is to prove the mathematical equality of the debits and credits
after posting. To uncover errors in journalizing and posting; and To serve as basis for the preparation of
the financial statements.

3. Define worksheet. Enumerate the steps in preparing the worksheet.

Answer: Worksheet is columnar sheet of paper on which accountants have summarized information
needed to make the adjusting and closing entries and to prepare the financial statements.

4. Discuss briefly how pre-closing trial balance is prepared.

Answer: Pre-closing trial balance shows the balances of all the accounts after the adjustments are
added/deducted from the balances of accounts in the unadjusted trial balance.

5. Discuss briefly how post-closing trial balance is prepared.

Answer: Post-closing trial balance shows the balances of all accounts after posting the closing entries

6. What are the standards to be observed to achieve fair presentation and reliable information of the
financial statements? Explain briefly.

Answer: To achieve fair presentation of reliable information of the financial statements, the following
standards shall be observed: Fairness of Presentation, compliance and Timeliness

7. What is the statement of management responsibility for financial statements?

Answer: To serve as the covering letter in transmitting the agency’s financial statements to the
commission on audit, Department of Budget and Management, other oversight agencies and other
parties.

8. What are the financial statements required by the new accounting system under PPSAS No. 1? Explain
each financial statement.

Answers: Statement of Financial Position, Statement of Financial Performance, Statement of changes in

Net Assets/Equity, Presentation of a comparison of budget and actual Amounts, Notes to Financial
Statements and Interim Reports
9. Differentiate the balance sheet approach of preparing the statement of cash flows from income
statement approach.

Answer: Balance Sheet Approach this method shows the agency’s net cash flow from all of its activities
calculated by adding the individual cash inflows and then deducting the individual cash outflows. This
method is the preferable approach. While Income Statement Approach this method starts with the net
income and adds back expenses and charges that do not entail cash payments.

10. Explain how notes to financial statements are normally presented in accordance with PPSAS No. 1,
Presentation of Financial Statements.

Answer: First A statement of compliance with PPSASs, Summary of significant accounting policies
applied, Supporting information for items presented on the face of the financial statements and Other
disclosures

11. What are interim reports?

Answer: Interim Reports are financial statements shall be prepared employing the same accounting
principles used for annual reporting.

Multiple choice

1. According to PPSAS No. 1, Presentation of Financial Statements, the set of Financial Statements to be
generated from the new accounting system are:

Answer: A. Balance sheet, Statement of changes in Net Assets/Equity, Statement of Income and
expenses, Statement of cash Flows, Presentation of a Comparison of Budget and Actual Amounts, And
Notes to financial statements

2. It is the financial statement prepared directly from the post-closing trial balance.

Answer: B. No, Yes

3. Which of the following is not a purpose for the preparation of trial balance?

Answer: C. To prove that no errors of any kind have been made in the accounts during the accounting
period.

4. Under the New Government Accounting System, Financial Reporting System includes the

Answer: A. Preparation and submission of financial statements.

5. Adjusting entries involve

Answer: A. Only real accounts

6. Why are adjusting entries necessary?

Answer: D. To correct erroneous balances in accounts

7. Closing entries

Answer: D. Remove the balances from the agency’s temporary accounts

8. The following are the financial statements generally prepared in the national government, except

Answer: D. Statement of Management Responsibility

9. It serves as the covering letter in transmitting the agency’s financial statements to commission on
audit, department of Budget and Management, and other oversight agencies and parties.

Answer: C. Statement of management responsibility

10. This financial statement shall be prepared from information taken diretly from the year-end post-
closing trial balance.

Answer: A. Balance sheet

Chapter 9 - Accounting for Local Government Units

1. Enumerate and explain the three separate books that shall be maintained by local government units
as required under Section 308, 309 and 310 of the Local Government code.

Answer: General Fund, Special Education Fund and Trust Fund.

2. Enumerate the special accounts in the general fund of a local government unit that shall be supported
by subsidiary ledgers.

Answer: Public Utilities and Other economic enterprises. Loans, interests, bonds issued, and other
contributions for specific purposes. Development projects funded from the Share in the Internal
Revenue collections and other special accounts, which may be created by law or ordinance.

3. Identify and discuss the two different kinds of books of accounts to be used by the local government
unit.

Answer: Journals and Ledgers

4. What are the two parts of the local government budget?

Answer: Statement of the certified estimated income and budget and Budget proposals

5. Enumerate the three main sources of income of local government units.

Answer: Tax revenues, fees and charges; Share from Internal Revenue collections; and Share from
National Wealth

6. Enumerate and explain the methods of accounting for income.

Answer: Accrual Method, Modified Accrual Method, cash Basis,

Multiple choice

1. Under the old and new manual, the following funds shall be maintained

Answer: D. General Fund, Trust Fund, Special Education Fund

2. This is the basis of recording the transactions in the journals.

Answer: C. Journal Entry Voucher

3. This is the journal used in recording all collections and deposits reported.

Answer: C. General Journal

4. What office in the local government unit shall maintain the cash records?

Answer: A. Accounting Office

5. What office in the local government unit shall maintain the cash records?

Answer: B. Office of the treasurer

6. This journal is used to record check payments made by the local treasurer/cashier.

Answer: C. Check Disbursement Journal

7. This is the accounting record, which shall be maintained to monitor accounts/ assets not recorded in
the books of accounts.

Answer: C. Special Account

8. This is the report used to settle cash advances for travel and for other purposes except those cash
advances granted to regular/special disbursing officer.

Answer: A. Liquidation Report

9. This form is used to request supplies and materials that are carried in stock.
Answer: A. Purchase Request

10. Grants and donations coming from foreign funding institutions, other levels of government and
private institutions/individuals for specific projects/purpose shall accrue to this fund.

Answer: D. Special Fund

Chapter 10 – The New Barangay Accounting System

Multiple Choices

1. Supplies and materials and small items with serviceable life of more than one year, like stapler,
puncher, mechanical tools, etc. shall be charged to

Answer: A. Expense

2. The accounting method adopted for the new barangay accounting system is

Answer: c. cash Basis

3. Under the new barangay accounting system, cash advance for payment of personnel services shall be
accounted as

Answer: c. Advances for Payroll

4. Recording of barangay transactions shall be recorded in the books through Journal Entry Voucher by

Answer: c. city/municipal accountant

5. What is the basis of the approved appropriations for barangays?

Answer: c. General Appropriation Ordinance (GAO)

6. Which of the following is a component of the General Fund of barangays?

Answer: A. Personnel Services

7. Under the new accounting system, the following appropriation shall be valid until fully spent or until
the planned activity is completed, except

Answer: A. capital outlay

8. which of the following is an Authorized Government Depository Bank (AGDB) recognized under the
new barangay accounting system?
Answer: A. Veterans Bank of the Philippines

9. It is the allotment released by Local Government Units or Department of Budget and Management to
barangays.

Answer: A. internal Revenue Allotment

10. This barangay official shall act as the property office of barangay.

Answer: B. Barangay Record Keeper