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CHAPTER 4:
REVENUES AND
OTHER RECEIPTS
Gov’t Accounting
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Revenues and Other Receipts
Fundamental Principles For Revenue
> Types of Funds
Sources of Revenue
> Exchange Transactions
> Non-exchange Transactions
Other Receipts
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Revenue
gross inflow of economic benefits (income)
or service potential during the reporting
period when those inflows result in an
increase in equity, other than increases
relating to contributions from owners.
includes only those that are received or
receivable by the entity in it’s own account
(Receipts).
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Fundamental c. Amounts collected in trust and from business-
type of activities of the government may be
Principles for separately recorded and disbursed in accordance
with relevant rules.
Revenue
d. Receipts shall be recorded as revenue of
(PD 1445) Special, Fiduciary, or Trust funds or Funds other
than Gen. Fund only when authorized by law.
e. Collecting officer shall immediately issue an
official receipt upon collecting a payment of any
a. All revenues shall be remitted to the National
nature.
Treasury and included in the Gen. Fund of the
Government unless another law allows otherwise.
b. All money and property received by a public
officer shall be accounted for as government Key Rules for
funds and property, unless otherwise stated under Government
the law. Revenue
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Fundamental numerical sequence. Duplicate shall be exact
copies of original.
Principles for
i. Collecting officer shall accept payments to the
government, in the form of checks, upon
endorsement and identification of the payee or
Revenue (PD 1445) endorsee. The collecting officer shall not use
government funds to encash private checks.
j. Receipts of government funds shall be
acknowledged in accordance with the law
f. Where mechanical devices are used to indicating the date, from whom and on what
acknowledge cash receipts, the COA may account the fund was received.
approve, upon request, the exemption from the
use of accountable forms.
g. Temporary receipts shall never be used to Key Rules for
acknowledge the receipt of public funds. Government
h. Pre-numbered ORs shall be issued in strict Revenue
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Types of Funds
General Special Trust Revenue
Fund Fund Fund Fund
Special Special
Depository Account in Purpose
Fund the General
Fund
Fund
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Relevant provision
of law:
All money collected on any tax levied for a
special purpose shall be treated as a
special fund and paid out for such purpose
only.
If the purpose for which a special fund was
created has been fulfilled or abandoned, the
balance shall be transferred to the general
funds of the Government.
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Where does revenue arise from?
Revenue arises from both exchange and
non-exchange transactions.
A. Exchange Transactions (Reciprocal transfers)
transactions in which one entity receives assets or
services, or has liabilities to extinguished and
directly gives approximately equal value to another
entity in exchange
e.g., sales of goods and rendering of services
B. Non-exchange Transactions (Non-Reciprocal
transfers)
are transactions in which an entity receives value
from another entity without directly giving equal
value in exchange
e.g., tax revenues, fines, penalties, and donations
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Exchange Transactions
Where do revenues from exchange transactions arise from?
a. Service Income - Permit, Registration, Franchising,
Sales of Goods
Licensing, Legal, Passport and Visa, Processing Fees
or Provisions
b. Business Income - School fees, examination gees, rent
of Services
income
a. Interest Income - charges for the use of cash or cash
Use of assets
equivalents or amounts due to the entity.
generating
b. Royalties - fees paid for the use of the entity’s assets
interest, royalties,
or dividends
c. Dividends - share of the National Government from the
earnings of its capital investments in GOCCs and other entities
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Recognition of Revenue from
Exchange Transactions
Sale of Goods Rendering of Services
Interest
Royalties Dividends
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Measurement of Revenue from
Exchange Transactions
measured at Fair Value of consideration received or receivable
trade discounts and volume rebates shall be taken into account
when cash flows are deferred, the fair value of the consideration is the present value of
the consideration receivable
Two ways:
Imputed Interest rate = Principal x Interest Rate x Number of years
Net Revenue = List Price − Total Discounts
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Scenario 1:
A company sells a product with a list price of ₱200,000, offering a total discount of
10%. The customer agrees to pay after 2 years, and the imputed interest rate is 5%.
1. Net Revenue Calculation: 2. Imputed Interest Calculation:
Net Revenue = ₱200,000 - (₱200,000 x 10%) Imputed Interest = ₱180,000 x 5% x 2
= ₱200,000 - ₱20,000 = ₱18,000
= ₱180,000
Two ways:
Imputed Interest rate = Principal x Interest Rate x Number of years
Net Revenue = List Price − Total Discounts
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Example:
Entity A sells goods with a list price of P10,000, on account, with the following credit
term 10%, 10%, and 5%. Revenue is...
Net Revenue = List Price − Total Discounts Total Discounts:
= P10,000 - P2,305 10% of P10,000 = P1,000 (1st discount)
= P7,695 10% of (P10,000 - P1,000) = P900 (2nd discount)
5% of (P10,000 - P1,000 - P900) = P405 (3rd discount)
Entity B sells equipment for P15,000 on credit with a payment due in 2 years. The
agreed interest rate is 8%. Calculate the imputed interest and the total revenue
recognized at the time of the sale.
Total Revenue = Principal − Imputed Interest Imputed Interest rate = Principal x Interest Rate x Number of years
= P15,000 − P2,400 Imputed Interest = P15,000 × 0.08 × 2 = P2,400
= P12,600
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EXCHANGE OF GOODS
OR SERVICES
Recognition
a. Similar – no revenue is recognized.
b. Dissimilar – revenue is recognized, measured using the following order of priority:
Fair value of the goods or services received, adjusted by the amount of any cash
transferred.
Fair value of the goods or services given up, adjusted by the amount of any cash
transferred.
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NON-EXCHANGE
TRANSACTIONS
Where are non-exchange transactions revenue derived from?
1. Taxes - compulsory payments intended to provide revenue to the government
2. Fines and Penalties - monetary sanctions received as a consequence of breach of
laws
3. Gifts, Donations, and Goods/Services In-kind - voluntary transfers of asset that one
entity makes without stipulations
4. Received without directly providing something of equal value in return
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Recognition of Revenue from
Non-Exchange Transactions
General: Tax Revenue:
recognized on a cash basis until reliable recognized at a gross amount and not
measurement model is developed reduced for expenses paid through the
assets, revenue, or liability are tax system
recognized when collected or when shall not be grossed up for tax
collectible expenditures
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Transfers: Fines and Penalties:
inflows of future economic benefits or recognized as income in the year they
service potential from non-exchange are collected
transactions. other than taxes recognized as revenue when the
e.g., fines, gifts, donations, service in receivable meets the asset recognition
kind, debt forgiveness, bequests and criteria and are measured at the best
grants estimate of inflow of resources
an entity collecting fines in the capacity
of an agent shall not treat those fines as
revenue
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Gifts, Donation and Goods in-kind: Services In-kind
recognized as revenue when it is not recognized as revenue due to
probable that future economic benefits uncertainties of control and measurement to
or service potential will flow to entity FV
if no received without condition,
recognized immediately
if with condition, initially - liability,
satisfied- revenue
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Measurement of Revenue
from Non-Exchange
Transactions
Assets - at the acquisition-date Fair Value
Liabilities - at Present Value, when the effect of time value of money is material
Revenue - the amount of increase in net assets. If non-exchange transaction is
initially recognized as a liability, the reduction in that liability is recognized as revenue.
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Other Recognition of Revenue
from Non-Exchange
Transactions
1. Debt Forgiveness – carrying amount of debt forgiven is recognized as revenue.
2. Bequests – (transfers made according to the provisions of a deceased person’s will) recognized
as revenue measured at fair value, if asset recognition criteria are met.
3. Grant with Condition – initially recognized as liability until condition is satisfied.
4. Pledges – (unenforceable promises to give) not recognized as revenue.
5. Concessionary Loans – (loans w/ below-market rate) difference b/w fair value and transaction
price is recognized as revenue if non-exchange transaction.
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Impairment Losses
and Allowance for
Impairment Losses
Recognition
When an amount already recognized as revenue
becomes uncollectible, it is recognized as expense
(i.e., impairment loss) rather than as an adjustment to
the revenue originally recognized.
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Other Receipts:
a. Receipt of subsidy from the National Government
Notice of Cash Allocation
Tax Remittance Advice
Non-cash Availment Authority
Cash Disbursement Ceiling
b. Receipt of subsidy or assistance from other government agencies, including LGUs and GOCCs
c. Receipt of excess cash advance granted to officers and employees
d. Receipt of refund of overpayment expenses
e. Receipt of performance bond or security deposit
f. Collections made on behalf of another entity
g. Intra-agency and Inter-agency fund transfers
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