CHAPTER 4: REVENUES AND OTHER RECEIPTS
Revenue- is the gross inflow of economic benefits or
service potential during the reporting period when
those inflows result in an increase in equity, other than
increases relating to contributions from owners.
Revenue includes only those that are received
or receivable by the entity in its own account. Receipts
refer to actual cash collections from all sources during
a period.
Fundamental Principles for Revenue
a. All revenues of an entity shall be remitted to the
National Treasury and included in the General Fund of
the National Government, unless another law
specifically allows otherwise.
b. All moneys and property received by a public
officer, acting in any capacity or upon any occasion,
shall be accounted for as government funds and
government property, unless another law specifically
states otherwise.
c. Amounts received in trust and from business-type
activities of the government may be separately
recorded and disbursed in accordance with relevant
rules.
d. Receipts shall be recorded as revenue of Special,
Fiduciary or Trust Funds other than the general Fund
only when authorized by law.
e. A collecting officer shall immediately issue an official
receipt (OR) upon collecting a payment of any nature.
f. Where mechanical devices (e.g, electronic official
receipt) are used to acknowledge cash receipts, the
COA may approve, upon request, the exemption from
the use of accountable forms.
g. Temporary receipts shall never be used to
acknowledge the receipt of public funds.
h. Pre-numbered official receipts (ORs) shall be
issued in strict numerical sequence. Duplicate copies
shall be the exact copies of the original.
i. A collecting officer shall accept payments to the
government in the form checks, upon proper
endorsement and identification of the payee or
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 - indicating
the date of receipt, from whom and on what account
the fund was received.
Types of funds
General fund- a fund which is available for any
purpose other than those which other funds have been
designated to.
Special fund - a fund designated for special purposes.
Trust fund (Fiduciary 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
in of any government agency and available for
appropriation, expenditure in accordance with the law:
Depository fund - fund held in an authorized
depository bank over which the recipient agency
retains control for the law., purposes for which the fund
was received.
Special Account in the General Fund (SAGF) -
established, facilitate the funding of priority activities of
the government.
The SAGF is sourced from specific fees, grants and
donation and other sources identified under the law.
The following a relevant legal provision regarding the
SAGF:
a. All income and collections for Special and
Fiduciary Fund. shall be remitted to the Treasury and
treated as SAGE.
b. The SAGF shall be considered as being
automatically appropriated for purposes authorized by
law, except when the General Appropriations Act
(GAA) provides otherwise.
c. SAGF shall be released to government
agencies subject to the approval of the President.
Special Purpose Funds (SPFs) - are "funds that the
President allocates for special programs and projects.
Unlike for other funds, SPFs are not under the
accountability of any particular government
agency/office or unit.
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, if anv, shall be
transferred to the general funds of the Government.
Sources of Revenue
Revenues may arise from exchange and on exchange
transactions.
A. Exchange transactions (Reciprocal transfers) -
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. (PPSAS 9 11) Examples: sale of goods and
rendering of services.
b. Non-exchange transactions (Non-reciprocal
transfers)- are transactions in which an entity either
receives value from another entity without directly
giving approximately equal value in exchange, or gives
value to another entity without directly receiving
approximately equal value in exchange. Examples: tax
revenue, fines and penalties and donations.
When the consideration transferred does not
approximate the fair value of the resources received,
the entity determines whether the transaction includes
a combination of exchange and non-exchange
transactions. Each component shall be recognized
separately.
If it is not immediately clear whether a
transaction is an exchange or non-exchange
transaction, the substance of the transaction shall be
examined to determine its type. For example, the sale
of goods is normally an exchange transaction.
However, if the transaction price is subsidized, the
transaction falls within the definition of a non-exchange
transaction.
The receipt of trade discounts, quantity
discounts, or other reductions in price does not
necessarily mean that the transaction is a non-
exchange transaction.
Exchange Transactions
Revenues from exchange transactions arise
from the following:
i. Sale of Goods or Provisions of Services to third
parties or other government entities. Examples
a. Service Income - Permit Fees, Registration
Fees, Franchising Fees, Licensing Fees, Legal Fees,
Passport and Visa Fees Processing Fees, and the like.
 b. Business Income - School Fees,
Examination Fees Rent/Lease Income,
Communication Network Fee, Income from
Hostels/Dormitories, Sales Revenue, Hospital Fees
Share in the Profit of Joint Venture, and the like.
ii. use by other entity of assets yielding interest,
royalties and dividends or similar distributions.
Examples:
a. Interest income charges for the use of cash or cash
equivalents, or amounts due to the entity:
b. Royalties - fees paid for the use of the entity's
assets such as trademarks, patents, software, and
copyrights; and
c. Dividends - share of the National Government from
the earnings of its capital/equity investments in
Government Owned or Controlled Corporations
(GOCCs) and other entities.
Recognition of Revenue from Exchange
Transactions
Sale of Goods:
Revenue from the sale of goods shall be recognized
when all of the following conditions are satisfied:
i.Significant risks and rewards of ownership of
the good are transferred to the buyer;
ii.The entity does not retain Continuing
managerial involvement or effective control over the
goods sold;
iii. It is probable that economic benefits will
flow to the entity;
iv. Revenue can be measured reliably; and
v. Costs relating to the transaction can be
measured reliably.
Rendering of Services:
Revenue from the supply of services is recognized on
a straight line basis over the period the services are
rendered.
However, revenue is recognized by reference
to the stage o completion (e.g.. percentage of
completion method) if the outcome of the transaction
can be estimated reliably, such as when all of the
following conditions are satisfied:
i. The stage of completion of the
transaction at the reporting date can
be measured reliably:
ii. It is probable that economic benefits
will flow to the entity;
iii. Revenue can be measured reliably;
and
iv. Costs relating to the transaction can
be measured reliably.
For practical purposes, when services are performed
by an indeterminate number of acts over a specified
time frame, revenue is recognized on a straight line
basis over the specified time frame unless there is
evidence that some other method better represents the
stage of completion.
When the outcome of the transaction involving the
rendering of services cannot be estimated reliably,
revenue is recognized only to the extent of the
expenses recognized that are recoverable.
Interest, Royalties & Dividends
a. Interest is recognized on a time proportion basis
that takes into account the effective yield on the asset;
b. Royalties are recognized as they are earned in
accordance with the substance of the relevant
agreement; and
c. Dividends are recognized when the entity's right to
receive payment is established.
A government entity normally recognizes
revenue from service income when the service are
rendered except when this is practicable, in which case
revenue is recognized when fees are collected.
Similarly, revenue from business income is recognized
when fees are billed, or if not practicable, when fees
are collected.
Measurement of Revenue from Exchange
Transactions
Revenue from exchange transactions are measured at
the fair value of the consideration received or
receivable. Any trade discounts and volume rebates
shall be taken into account.
Fair value - is the amount for which an asset
could be exchanged, or a liability settled, between
knowledgeable willing parties in an arm's length
transaction.
When cash flows are deferred, the fair value of
the consideration may be less than its nominal amount.
In this case the fair value of the consideration
receivable is determined by discounting all future cash
flows using an imputed rate of interest The difference
between the fair value and the nominal amount on the
consideration is recognized as interest revenue.
When the consideration is received in
advance, it is initially recognized as a liability and
subsequently recognized as revenue only when the
revenue recognition criteria are met.
Exchanges of Goods or Services
a. Similar nature and value do not give rise to revenue.
b. 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 transferred.
ii. Fair value of the goods or services given
up, adjusted by the amount of any cash transferred.
Non-exchange Transactions
Revenue from non-exchange transactions are derived
mostly from taxes, fines and penalties, gifts, donations
and goods in-kind. These are received without directly
providing something of equal value in return.
Taxes- are compulsory payments intended to provide
revenue to the government. Taxes do not include fines
and penalties.
Fines and penalties - are monetary sanctions
received as a consequence of breach of laws.
Gifts, Donations and Goods/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
Revenue from non-exchange transactions are
recognized on a cash basis until a reliable
measurement model is developed. Accordingly, the
asset and revenue or liability arising from a non-
exchange transaction are recognized when collected
or when these are measurable and legally collectible.
Tax revenue
 Tax revenue is recognized at a gross amount
and not reduced for expenses paid through the
tax system.
Expenses paid through the tax system are
those which should be paid irrespective of whether the
taxpayers pays taxes, or uses a particular mechanism b. Liabilities - at present value, when the effect of
to pay taxes. time value of money is material.
C. Revenue - at the amount of increase in net assets.
 Tax revenue shall not be grossed up for the If the non- exchange transaction is initially recognized
amount of expenditures. as a liability, the Subsequent reduction in that liability is
Tax expenditures are preferential provisions of the recognized as revenue.
tax law that provide certain taxpayers with concessions Debt Forgiveness
that are not available to others. Tax expenditures are When a lender cancels the debt of a
foregone revenue, not expenses. government entity, the debtor recognizes revenue
Type of tax Taxable event equal to the carrying amount of the debt forgiven.
Income tax Earning of taxable However, when a controlling entity cancels the
income debt of a wholly owned controlled entity, the cancelled
Value added tax Undertaking of a taxable debt is treated as contribution from owners and not
activity revenue.
Goods and services tax Purchase or sale of
taxable goods or Bequest
services Bequests are transfers made according to the
Customs duty Movement of dutiable provisions of a deceased person's will. A bequest that
goods or services across satisfies the recognitions criteria for asset is
the customs boundary recognized as revenue, measured at the fair value of
Death duty Death of the owner of the resources received or receivable.
the taxable property Grant with Condition
Property tax Passage of the time An asset received under a grant with condition
period for which the tax is initially recognized as liability and recognized as
is levied. revenue only when the condition is satisfied.
Pledges
Transfers Pledges are unenforceable undertakings to
Transfers are inflows of future economic benefits transfer assets to the recipient entity.
or service potential from non-exchange transactions, Pledges are not recognized as revenue
other than taxes. because they do not meet the recognition criteria for
Transfers include fines, gifts, donations and goods asset, i.e., at present, the entity has not yet obtained
an services in-kind, debt forgiveness, bequests, and control over the item pledged.
grants. All of these transactions transfer resources If the pledged item subsequently transferred to
without approximate equal value in exchange and are the recipient entity, it is recognized as a gift or
not taxes but some are with conditions. donation. Pledges may warrant disclosure as
Fines and penalties contingent assets.
Fines and penalties are recognized as income in the Concessionary Loans
year they are collected. are loans received by an entity at below market terms.
However, fines are recognized as revenue The entity considers whether the difference
when the receivable meets the recognition criteria for between the transaction price (loan proceeds) and the
asset and are measured at the best estimate of inflow fair value of the loan on initial recognition is a non-
of resources to the entity. exchange transaction. If it is so, the difference is
An entity collecting fines in the capacity of an recognized as revenue, except if a a present obligation
agent shall not treat those fines as revenue. exists. in which case the difference is recognized as a
Gifts, Donations and Goods In-kind Gifts, liability and recognized as revenue only when the
recognized as revenue when it is probable that future obligation is satisfied.
economic benefits or service potential will flow to the Impairment Losses and Allowance for Impairment
entity. Those that are received without conditions are Losses
recognized immediately as revenue. Those with When an amount already recognized as revenue
conditions are initially recognized as liability and becomes uncollectible, it is recognized as expense
recognized as revenue only when the conditions are (impairment loss) rather than as an adjustment to the
satisfied. revenue originally recognized.
Services ln-kind Other Receipts
Services In-kind are not recognized as revenue due to Other receipts include, but not limited to, the following:
the uncertainties affecting the entity's ability to control a. Receipt of subsidy from the National
those services and measure them at fair value. Government (i.e., disbursement authority), such as
Examples of services in-kind include technical receipt of:
assistance from foreign bodies, community services i. Notice of Cash Allocation (NCA)
rendered by persons convicted of offenses, volunteer ii. Tax Remittance Advice
services, and the like. Services in-kind received may iii.Non-Cash Availment Authority
be disclosed in the notes. iv. Cash Disbursement Ceiling
Measurement b. Receipt of subsidy or assistance from other
Assets, liabilities and revenue arising from a non- government agencies. including LGUs and
exchange transaction are measured as follows: GOCCs. The Collecting Officer shall issue an official
a. Assets - at the acquisition-date fair value. receipt (OR) upon receipt of any of these
subsidies/assistance.
C. Receipt of excess Cash advance granted to
officers and employees.
d. Receipt of refund of overpayment of expenses.
e. Receipt of performance bond or security
deposit. A performance bond is a security deposit
required from a contractor or supplier to guaranty the
full and faithful performance of a contract. It may be in
the form of cash or certified check.
f. Collections made on behalf of another entity. the
collecting entity records the collection as a credit to the
"Due to NGAs" account. Upon receipt of remittance,
the recipient entity records the collection as a credit to
the "Trust Liabilities" account.
g. Intra-agency and Inter-agency fund transfers.