Revenues and Other Receipts

 

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REVENUE

- the gross gross inflow of economic benefits or service potential during the reporting period when those result in an increase in equity - includes only those that are received or receivable by the entity in its

own account 

RECEIPTS - Refer to actual cash collections collections from from all sources sources during a period

 

a.

 All revenues revenues should be admitted to the National Treasury Treasury and included in the General Fund of the National Government. Government.

b.

 All moneys and properties received received by a public officer shall be accounted for as government gov ernment funds and property.

c.

In accordance with relevant rules, amounts that are received received in trust and from business-type activities of the gov government ernment may be recorded recorded and disbursed separately.

d. e.

Receipts shall be recorded as rev revenue enue of Special, Fiduciary or Trust Funds, or Funds other than the th e General Fund only on ly when authorized by law law..  A collecting officer shall immediately issue an official receipt upon collecting a payment of any nature na ture..

f.

Where mechanical devices are used to acknowledge cash receipts, upon request, the COA CO A may approve the exemption from from the use u se of accountable forms. f orms.

g.

Temporary Tempor ary receipts shall never be used to acknowledg acknowledge e the receipt of public funds.

h.

Pre-numbered Pre-number ed official receipts shall be issued in strict str ict numerical response. response.

i.  j.

 A collecting officer shall accept payments to the government government in the form for m of checks but shall not use government government funds to encash private checks. Receipts of government funds shall be acknowledge with the law

 

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GENERAL FUND –  FUND – available available for any purpose other than those funds have been designated to.

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SPECIAL FUND –  FUND – designated designated for special purposes. TRUST FUND (FIDUCIARY FUND) –  FUND) – held held by a go government vernment agency or public off officer icer acting as trustee, agent, or administrator for the fulfillment of a condition.

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REVENUE FUND –  FUND – all all funds derived for from the income and available appro appropriation priationof any government agency DEPOSITARY DEPOSITAR Y FUND FUND –   – fund fund held in an authorized depositary bank over which the recipient recipi ent agency retains control for the lawful purposes

 

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SPECIAL ACCOUNT IN THE GENERAL FUND (SAGF) –  (SAGF) – establis established hed to ffacilitate acilitate the funding of priority pr iority activities of the go government. vernment. The following are relevant legal provisions regarding SAGF: collections for Special and Fi Fiduciary duciary Funds shall be a.  All income and collections remitted to the Treasury and treated as SAGF. b. SAGF shall be considered as being automatically appropriated for purposes authorized by law, except when the General Appropriations Act provides otherwise. c. SAGF shall be released to government agencies subject to the approval of the President.

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SPECIAL PURPOSE FUNDS (SPFs) –  (SPFs) – funds funds for special programs and projects allocated by the President and not under the accountability of any government agency

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Relevant provision of law –  law – all all money collected on tax levied for a special purpose shall be treated as special fund and any balance should be transferred to the general funds. (Art. VI, Sec. 29(3) PhC)

 

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Revenues may arise from two transactions: Exchange and Non-exchange transaction.

 A.

EXHANGE TRANSACTIONS (Reciprocal transfers) - transactions in which an entity recei receives ves asset assetss or services or extinguished liabilities and sacrifices something with appro approximate ximate same value. Example: sale of goods and rendering of services

B.

NON-EXHANGE TRANSACTIONS (Non-reciprocal transfers) - an entity gives (receiv (receives) es) value without directl directly y receiving (gi (giving) ving) the same  value in return return Example: tax revenue, fines and penalties

 

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Revenues from exchange transactions arise from the following:

a.

Sale of goods or provision of services to third parties or other government entities. Examples: 1. Service Income –  Income – permit permit fees, licensing fees, passport, visa fees and the like 2. Business Income –  Income – hospital hospital fees, school fees and examination fees, rent fees and the like

b.

Used by other entity of assets yielding interest, royalties and dividends Examples: 1. Interest income income –   – charges charges for the use of cash or cash equivalents 2. Royalties – Royalties – fees paid for the use of the entity’ entity’ss assets 3. Dividends –  Dividends – shar share e of the National Government fr from om the ear earnings nings of its capital/equity investments investments in Gov Government-Owned ernment-Owned or Controlled Contr olled Corporations (GOCCs) and other entities

 

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Recognition of Reven Revenues ues

SALES OF GOODS: - Can be recognized as re revenue venue if following conditions are are satisfied: a. Significant risk and rewards of ownership of the goods are transferred to the buyer; b. Entity does not retain continuing managerial involvement or effective control over the goods sold; c. It is probable that economic benefits will flow to the entity; d. revenue revenue can be me measured asured reliably; and e. cost can be measured reliably

 

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Recognition of Reven Revenues ues

RENDERING SERVICES: - recogniz recognized ed on a str straight aight line basis - Can be recognized as re revenue venue in refer reference ence to the stage of completion if following conditions are satisfied: a. The stage of completion of the transaction can be measured reliably at the reporting date; b. It is probable that economic benefits will flow to the entity; c. revenue revenue can be me measured asured reliably; and d. cost can be measured reliably

 

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Recognition of Reven Revenues ues

INTEREST, RO ROYALTIES YALTIES & DIVIDENDS DIVIDENDS:: a. Interest Income –  Income – recognized recognized on a time proportion basis that takes into account the effective yield on the asset b. Royalties –  Royalties – recognized recognized as they are earned in accordance with the substance of the relevant agreement c. Dividends – Dividends – recognized recognized wh when en the entity’ entity’ss right to rreceive eceive pa payment yment is established 

Measurement of Revenue - measur measured ed at fair value of the consideration consideration

 

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Measurement of Revenue

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Example:

A sells goods withas a list price of P20,000, with the credit credit term of 10% and 5%.Entity Revenue is recognized follows: Date

Accounts R Re eceivable Sales Revenue Revenue (20,000 * 90% * 95*) To record sales on account.

17,100 17,100

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Cash flows are deferred –  deferred – fair fair value of the consideration < nominal amount

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When consideration received in advance, it’s initially recorded as liability then recognized as revenue when criteria are met.

 

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Exchanges of Goods or Services a. b.

Similar nature and value do not give rise to revenue. Dissimilar nature and value give rise to revenue measured using the following order of priority: i. Fair value of the goods or services received, adjusted by the amount of any cash transferr transferred. ed. ii. Fair value of the goods or services given up, adjusted by the amount of any cash transferr transferred. ed.

 

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Revenue for non-exchange transactions are derived from: a. Taxes Taxes –   – compulsory compulsory payment intended to provide revenue to the government. b. c.

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Fines and penalties –  penalties – monetary monetary sanctions received as consequence of breach of laws Gifts, donations and goods/services in kind –  kind –  voluntary  voluntary transfer transfer of ass assets ets and services that one entity makes to another

Recognition of Reven Revenue ue  – recogni  – recognized zed on a cash basis

 

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Recognition of Reven Revenue ue TAX REVENUE Recognized at a gross amount and not reduced for expenses paid through the tax system Shall not be grossed up for the amount of tax expenditures Examples: •

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Type of Tax

Taxable Event

Income Tax  Value  Value added tax

Ear ning of taxable income Undertaking of a taxable activity

Customs duty

Movement of dutiable goods or services across the customs boundary

Death duty

Death of the owner taxable proper ty

 

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Recognition of Reven Revenue ue

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TRANSFERS - inflows of futur future e economic benefits from non-exchange transactions transactions other than taxes

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Fines and Penalties –  Penalties – recognized recognized as income in the year they are collected; fines are recognized as revenue when receivable meets the recogni recognition tionnot criteria for asset; an as entity collecting fines as an agent shall recognized fines revenue.

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Gifts, Donations and Goods In-kind –  In-kind – recognized recognized as revenue when it is probable that future economic benefits will flow to the entity.

 

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Recognition of Reven Revenue ue

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Services In-kind –  In-kind – not not recognized as revenue due to the uncertainties; it may be disclosed in the notes Examples: volunteer services, technical assistance from foreign bodies

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Measurement

a.

 Assets –   Assets  – at at the acquisition-date fair value

b.

Liabilities –  Liabilities  – at at present value, when the effect of time value of money is material

c.

Revenue –  Revenue  – at at the amount of increase in net assets, if the revenue is recognized as liability initially, the reduction in the liability is recognized as revenue

 

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DEBT FORGIVENESS

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Lender –  Lender  – recognizes recognizes revenue equal to the carrying amount of the debt forgiven

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Controlling entity –  entity – the the cancelled debt is treated as contribution from owners

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BEQUESTS

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Made according to the request of a deceased person’s will, recognized revenue  when the recognition recognition criteria for asset is satis satisfied fied and measur measured ed at the fair value of the resources received or receivable.

 

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GRANT WITH CONDITION

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Initially recognized as liability and recognized as revenue when the condition is satisfied.

Example: Foreign grant of is rreceived eceived P10M is rreceived eceived by the nationa nationall go governme vernment nt (NG) conditioned on the construction of a flood control system which must must be completed within the next 2entity years,isotherwise the grant must be returned to the grantor. The implementing the DPWH.

 

The journal jour nal entries are as follows: a.

Receipt of grant Books of the NG - BTr

Debit

Cash in bank –  bank – local local currency, Bangko Sentral Sentr al ng Pilipinas Pilipinas Other Deferred Credits

P 10M

Credit

P 10M

Books of DPWH

Cash – Modified Cash –  Modified Disbursement System (MDs), Regular Subsidy from NG

P 10M P 10M

 

b.

Disbursement for materials and labor amounting to P 10M 1 0M Books of the NG - BTr Subsidy from NG Cash in bank –  bank – local local currency, Bangko Bangk o Sentral Sentral ng Pilipinas Pilipinas

Debit P 10M

Credit

P 10M

Books of DPWH

Construction in Progress –  Progress –  Infrastructure Infrastructur e Assets Cash –  Cash  – Modified Modified Disbursement System (MDs), Regular

P 10M P 10M

 

c. Completion of the project Books of the NG - BTr Other Deferred Credits Income from grants and donations in cash

Debit P 10M

Credit

P 10M

Books of DPWH

Flood Control System Construction in progress Infrastructure Infrastructur e Assets

P 10M P 10M

 

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PLEDGES  an unenforceable undertakings to transfer assets to the recipie recipient nt entity 

Not recognized as revenue

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CONCESSIONARY LOANS

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Loans received by an entity at below market terms

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Recognized as revenue revenue (difference between fair value and the transaction price

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If present obligation exists, the difference is recognized as liability and if the obligation is satisfied, it will be recognized as revenue.

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IMPAIRMENT LOSSES AND ALLOWANCE FOR IMPAIRMENT LOSSES

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Revenue recognized becomes uncollectible –  uncollectible – it it is recognized as expense rather than an adjustment to the revenue.

 

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Other receipts include, but not limited to, the following:

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Receipts of subsidy from the National Government

a.

Notice of Cash Allocation (NCA)

b.

Tax Remittance Advice

c.

Non-Cash Av Availment ailment Authority Cash Disbursement Ceiling

d.

 

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Receipts of subsidy or assistance from other government agencies, including LGUs and GOCCs. The collecting officer shall issue an official receipt upon receipt of any of these subsidies/assistance. The journal entries are as follows:

Date Da te

Cash Cash-C -Col olle lect ctin ing g Of Offi fice cers rs Subsidy from other NGAs  Assistance from from LGUs  Assistance from from GOCCs

100,000 60,000 30,000 10,000

To recognize receipt of subsidy/assistance  from the other government government agencies. agencies. Date Dat e

Cash-T Cash-Trreasury easury/Ag /Agenc ency y Depo Deposit sit,, Trust Trust Cash-Collecting Officers To recognize remittance of collections to the  BTr..  BTr

100,000 100,000

 

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Receipts of excess cash advance granted to officers and employees. (not) Receipt of refund of overpayment of expenses.

Date Da te

Date Dat e

Cash Cash-C -Col olle lect ctin ing g Of Offi fice cers rs  Appropriate expense expense account To recognize collection of refund of overpayment of expenses. Cash-T Cash-Trreasury easury/Ag /Agenc ency y Deposi Depositt (Regul (Regular ar,, Special Account or Trust) Cash-Collecting Officers To recognize remittance of collections to the  BTr..  BTr

10,000 10,000

10,000 10,000

 

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Receipts of performance bond or security deposit.

Date Da te

Cash Cash-C -Col olle lect ctin ing g Of Offi fice cers rs

100,000 100,000

Guaranty/Security Deposits Payable To recognize collection of performance  bond/security deposits. deposits. Date Dat e

Cash-T Cash-Trreasury easury/Ag /Agenc ency y Depo Deposit sit,, Trust Trust Cash-Collecting Officers To recognize remittance of collections to the  BTr.  BTr.

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Collections made on behalf of another entity entity..

100,000 100,000

 

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Intra-agency Intra-ag ency and Inter-agency fund transfers. Intra-agency Intra-ag ency Fund Transfer (same)

Date Da te

Cash Cash-C -Col olle lect ctin ing g Of Offi fice cers rs Due to (Central Office, Regional Office, Operating Units or Other Funds) To recognize receipt of intra-entity fund

transfer. Date Cash-T Date Cash-Trreasury easury/Ag /Agenc ency y Depo Deposit sit,, Trust Trust Cash-Collecting Officers To recognize remittance of collections to the  BTr..  BTr

100,000 100,000

100,000 100,000

 

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Inter-agency Fund Transfer (different) Date Da te

Date Dat e

Cash Cash-C -Col olle lect ctin ing g Of Offi fice cers rs Due to (NGAs, LGUs or GOCCs) To recognize receipt of inter-entity fund transfer.

100,000

Cash-T Cash-Trreasury easury/Ag /Agenc ency y Depo Deposit sit,, Trust Trust Cash-Collecting Officers To recognize remittance of collections to the  BTr..  BTr

100,000

100,000

100,000