Chapter 4.

Revenue and Other Receipts

Introduction
 Revenue is the gross inflow of economic benefits or service potential during the reporting
period
 Revenues are those that are received and receivable by an entity while receipts are those
actual collections during the period.
Fundamental Principles of Revenue
 All revenues must be remitted to the National Treasury and included in General fund
 All money and property received by a public officer shall be accounted for as government
funds and property
 Amounts received in TRUST and BUSINESS-TYPE activities of the government may be
separately recorded and disbursed
 Receipts shall be recorded as Special, Trust or Fiduciary Funds, or Funds other than
General Fund only when authorized by law
 Collecting officer shall immediately issue an Official Receipt upon collecting a payment
 Where mechanical devices are used to acknowledge cash receipts, the COA may
approve, upon request, the exemption from the use of accountable forms
 Temporary receipts shall never be used
 Pre-numbered official receipts shall be used in strict numerical sequence
 A collecting officer shall accept payment to the government in a form of checks. The
collecting officer shall not use government funds to encash private checks
 Receipts of government funds shall be acknowledged in accordance with the law.

Types of Funds
 General Fund – fund that is available for any purpose
 Special Fund – a fund designated for a special purpose
 Trust Fund – fund held by a government agency or public officer acting as trustee, agent
or administrator for the fulfillment of a condition
 Revenue Fund – comprises all funds derived from the income of any government agency
 Depository Fund – fund held in an authorized depository bank
 Special Account in General Fund (SAGF) – established to facilitate the funding of the
priority activities of the government
 The following are relevant legal provisions regarding the SAGF:
 a. All income and collections for Special and Fiduciary Funds shall be
remitted to the Treasury and treated as SAGF
b. The SAGF shall be considered as being automatically appropriated for
purposes authorized by law, except when GAA provides otherwise
c. SAGF shall be released to government agencies subject to the
approval of the president
 Special Purpose Funds – Funds that the President allocates for special programs and
projects
 Relevant Provision of Law:
 All money collected on 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, if any, shall be
transferred to the general funds of the Government. (Art. VI. Sec. 29(3). Philippine
Constitution)
Sources of Revenue
 Exchange Transactions – reciprocal transfers (ex. Sale of goods or rendering of service)
 Are transactions in which one entity receives assets or services, or has liabilities
extinguished, and directly gives approximately equal value to another entity in
exchange
 Non-exchange transactions – non-reciprocal transfers (ex. tax revenue)
 Are transactions in which an entity either receives value from another entity without
directly giving approximately equal value in exchange or vice versa
Exchange transactions
 Arise from the following:
 Sale of Goods or Provisions of Services
 Service Income
 Business Income
 Use by another entity of assets yielding interests, royalties and dividends, or similar
distributions
 Interest income
 Royalties
 Dividends
Recognition of Revenue from Exchange Transactions
 Sale of goods – revenue is recognized when ALL of the following conditions are satisfied:
 Significant risks and rewards of ownership of goods is transferred to the buyer
 The entity does not retain continuing managerial involvement or effective control
over the goods sold
 It is probable that economic benefits will flow to the entity
 Revenue can be measured reliably
 Cost relating to transactions can be measured reliably
 Rendering of Services – revenue is recognized by reference to the stage of completion,
such as when ALL of the following conditions are satisfied:
 The stage of completion of transaction at the reporting date can be measured
reliably
 It is probable that economic event will flow to the entity
 Revenue can be measured reliably
 Cost relating to transactions can be measured reliably
- When the outcome cannot be estimated reliably, revenue is recognized only to extent
of recoverable costs
 Interest, Royalties and Dividends
 Interest is recognized on a time proportion basis that takes into account the
effective yield to the asset
 Royalties are recognized as they are earned
 Dividends are recognized when the entity’s right to receive payment is established
Measurement of revenue from exchange transactions
 Are measured at the fair value of the consideration received or receivable. Any trade
discounts or volume rebates shall be taken into account
 Exchanges of Goods and services
 If similar, no revenue is recognized
 If dissimilar, revenue is recognized using the ff. order of priority:
i. FV of the goods or services receive, adjusted by the amount of any cash
transferred
ii. FV of the goods or services given up, adjusted by the amount of any cash
transferred.
Non-Exchange Transactions
 Derived mostly from:
 Taxes – re compulsory payments intended to provide revenue to the government
 Fines and penalties – are monetary sanctions received as a consequence of
breach of laws
 Gifts, Donations, and good/services in-kind – are voluntary transfers of assets and
services that one entity makes to another, normally free from stipulations
Recognition of Revenue from Non-exchange Transactions
 Are recognized when collected or when these are measurable and legally
collectible
 Tax revenues
 Recognized at a gross amount and not reduced for expenses paid through the tax
system
 Shall not be grossed up for the amount of the tax expenditures
 Fines and penalties
 Recognized in the year they are collected
 Gifts, Donations and Goods in kind
 Are recognized as revenue when it is probable that future economic benefit will
flow to the entity
 Services in kind
 Are NOT recognized as revenue but may be disclosed in the notes
Measurement
 Assets, liabilities and revenues arising from a non-exchange transaction are measured as
follows:
a. Assets – at the acquisition date fair value
b. Liabilities – at present value
c. Revenue – at the amount of increase in the net assets
✓ Debt Forgiveness
- when a lender cancels the debt of a government entity
✓ Bequests
- Transfers made according to the deceased person’s will
✓ Grant with condition
- Initially recognized as liability and recognized as revenue only when the condition
is satisfied
✓ Pledges
- are unenforceable undertakings to transfer assets to the recipient entity
✓ Concessionary loans
- Loans received by an entity at below market terms
Other receipts
 Receipt of subsidy from the National Government
i. Notice of Cash Allocation (NCA)
ii. Tax Remittance Advice
iii. Non-cash Availment Authority
iv. Cash Disbursement Ceiling
 Receipt of subsidy and assistance from the other government agencies including LGUs
and GOCCs
 Receipt of excess cash advance granted to officers and employees
 Receipt of refund of overpayment of expenses
 Receipt of performance bond or security deposit
 Performance bond - is a security deposit required from a contractor or supplier to
guarantee the full and faithful performance of a contract
 Collections made on behalf of another entity
 Intra-agency and inter-agency fund transfers
Summary: