FUNDAMENTAL PRINCIPLE OF REVENUE

All revenues accruing to the NGAs shall be governed by the following fundamental principles:

a. Unless otherwise specifically provided by law, all revenues accruing to an entity by virtue of
the provisions of existing law, orders and regulations shall be deposited/remitted in the
National Treasury (NT) or in any duly authorized government depository, and shall accrue to the
General Fund (GF) of the NG.

b. Except as may otherwise be specifically provided by law or competent authority, all moneys
and property officially received by a public officer in any capacity or upon any occasion must be
accounted for as government funds and government property.

c. Amounts received in trust and from business-type activities of government may be separately
recorded and disbursed in accordance with such rules and regulations as may be determined by
a Permanent Committee composed of the Secretary of Finance as Chairman, and the Secretary
of Budget and Management and the Chairman, COA, as members.

d. Receipts shall be recorded as revenue of Special, Fiduciary or Trust Funds or Funds other than
the GF, only when authorized by law as implemented by rules and regulations issued by the
Permanent Committee.

e. No payment of any nature shall be received by a collecting officer without immediately

issuing an official receipt in acknowledgement thereof. The receipt may be in the form of
postage, internal revenue or documentary stamps and the like, officially numbered receipts,
subject to proper custody, accountability, and audit.

f. Where mechanical devices (e.g. electronic official receipt) are used to acknowledge cash
receipts, the COA may approve, upon request, exemption from the use of accountable forms.

g. At no instance shall temporary receipts be issued to acknowledge the receipt of public funds.

h. Pre-numbered ORs shall be issued in strict numerical sequence. All copies of each receipt
shall be exact copies or carbon reproduction in all respects of the original.

i. An officer charged with the collection of revenue or the receiving of moneys payable to the
government shall accept payment for taxes, dues or other indebtedness to the government in
the form of checks issued in payment of government obligations, upon proper endorsement
and identification of the payee or endorsee. Checks drawn in favor of the government in
payment of any such indebtedness shall likewise be accepted by the officer concerned.

At no instance should money in the hands of the CO be utilized for the purpose of cashing
private checks.

j. Under such rules and regulations as the COA and the Department of Finance (DOF) may
prescribe, the Treasurer of the Philippines and all AGDB shall acknowledge receipt of all funds
received by them, the acknowledgement bearing the date of actual remittance or deposit and
indicating from whom and on what account it was received. (Sec. 70, P.D. 1445)
ACCOUNTING STANDARD FOR REVENUE

 Philippine Public Sector Accounting Standards (PPSAS) 9: Revenue from Exchange

Transactions
 Philippine Public Sector Accounting Standards (PPSAS) 23: Revenue from Non-Exchange
Transactions

Measurement of revenue

Revenue should be measured at the fair value of the consideration received or receivable. An
exchange for goods or services of a similar nature and value is not regarded as a transaction
that generates revenue. However, exchanges for dissimilar items are regarded as generating
revenue.

If the inflow of cash or cash equivalents is deferred, the fair value of the consideration receivable
is less than the nominal amount of cash and cash equivalents to be received, and discounting is
appropriate. This would occur, for instance, if the seller is providing interest-free credit to the
buyer or is charging a below-market rate of interest. Interest must be imputed based on market
rates.

Recognition of revenue

Recognition, as defined in the IASB Framework, means incorporating an item that meets the
definition of revenue (above) in the income statement when it meets the following criteria:

 it is probable that any future economic benefit associated with the item of revenue will
flow to the entity, and
 the amount of revenue can be measured with reliability
ACCOUNTING STANDARD FOR REVENUE RECOGNITION
Revenue recognition is a generally accepted accounting principle (GAAP) that stipulates how
and when revenue is to be recognized. The revenue recognition principle using accrual
accounting requires that revenues are recognized when realized and earned–not when cash is
received
SOURCES OF REVENUE
A) Exchange transactions (Reciprocal transfers) – one entity either receives assets or services,
or has liabilities extinguished, and directly gives approximately equal value to another entity
in exchange
1) Sale of Goods/ Provisions of Services to 3rd parties or other government entities
a) Service Income
b) Business Income
2) Used by other entity assets yielding interest, royalties and dividends or similar
distributions
a) Interest income
b) Royalties – intangible assets, earned in accordance to agreement
c) Dividends
B) Non-exchange transactions (Non-reciprocal transfers) – an entity receives value from
another entity either receives value from another entity which without directly giving
approximately equal value in exchange or gives value to another entity without directly
receiving approximately equal value in exchange
1) Taxes – compulsory payments intended to provide revenue to the government
a) Income tax
b) Value added tax
c) Goods and services tax
d) Customs duty
e) Death duty
f) Property tax
2) Fines and penalties – monetary sanctions received as consequence of breach of laws
3) Gift, Donations and Goods/Services In-kind – voluntary transfers of assets and
services that one entity makes to another, normally free from stipulations
SOURCES OF OTHER RECEIPTS

A) Receipt of subsidy from the National Government

1) Notice of Cash Allocation (NCA)
2) Tax Remittance Advice (TRA)
3) Non-cash Availment Authority
4) 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 not recognized as
revenue
D) Receipt of refund or overpayment of expenses not recognized as revenue
E) Receipt of performance bond or security deposit not recognized as revenue
F) Collections made in behalf of another entity not recognized as revenue
G) Intra-agency and Inter-agency fund transfers not recognized as revenue

GOVERNMENT AGENCIES VS PROFIT ENTITIES: ACCOUNTING DIFFERENCES

Financial asset
Government agencies Profit agencies

Petty cash fund maintained at imprest system Imprest or fluctuating system

only

Monthly bank reconciliation - adjusted balance Adjusted balance method, book to bank
method method, or bank to book method.

Inventory
Government agencies Profit agencies

Consists of: Consists of:

a. Inventory HFS a. Inventory HFS

b. Inventory held for distribution b. Inventories in the process of production for

c. Inventory held for manufacturing
d. Inventory held for consumption
e. Semi-expendable property
Subsequent measurement
sale or distribution
c. Inventories in the form of materials or
supplies to be consumed in the production
process or distributed in the rendering of
services
Subsequent measurement

If held for sale LCNRV LCNRV

If held for distribution Lower of Cost and

Current replacement cost

Cost formulas: Cost formulas:

a. Specific identification a. Specific identification

b. Weighted average cost b. Weighted average cost

c. First-in, First-out
Perpetual inventory system Either perpetual inventory system or periodic
inventory system
Biological Assets
Government agencies Profit agencies

Initially and subsequently measured at Fair value Measured at Fair value less costs of disposal
less costs to sell
When FV cannot determined reliably, measured
at cost less accumulated depreciation and
impairment losses

When there is production cycle of more than

one year, separate disclosure is encouraged for
physical change and price change

Investment Property
Government agencies Profit agencies

Measured using cost model only Measured using cost model or fair value model

Property, Plant and Equipment

Government agencies Profit agencies

Acquisition through Intra-agency or Inter-

agency Transfers is measured at carrying
amount

Subsequently measured using cost model Subsequently measured using cost model or
revaluation model

Depreciation shall be recognized on a monthly Depreciation may be on a monthly, quarterly, or

basis annual basis

Intangible Assets
Government agencies Profit agencies

Initial measurement at cost At cost

Subsequent measurement: 1) Indefinite life, not Cost model or revaluation mode: 1) indefinite
amortized but is tested for impairment; 2) finite life, not amortized but is tested for impairment;
life, straight line method over period of 2-10 yrs, 2) Finite life, amortized over useful life
residual value assumed to be zero

Liabilities
 Government agencies Profit agencies

Leases
Government agencies Profit agencies