REVENUE AND OTHER RECEIPTS

Unless otherwise specifically provided by law, all revenue (income) accruing to the
departments, offices and agencies by virtue of the provisions of existing laws, orders and
regulations shall be deposited in the NT or in the duly authorized depository of the Government
and shall accrue to the xxx General Fund of the Government:
In case of Special, Fiduciary and Trust Funds:
Receipts shall be recorded as revenue of Special, Fiduciary or Trust Funds (TF) only
when authorized by law and following such rules and regulations as may be issued by the
Permanent Committee consisting of the Secretary of Finance as Chairman, and the Secretary of
the Budget and the Chairman, Commission on Audit, as members. The same Committee shall
likewise monitor and evaluate the activities and balances of all Funds of the NG other than the
GF and may recommend for the consideration and approval of the President, the reversion to
the GF of such amounts as are: (1) no longer necessary for the attainment of the purposes for
which said Funds were established, (2) needed by the GF in times of emergency, or (3) violative
of the rules and regulations adopted by the Committee

Revenue from Exchange Transactions

Revenues received by the NGAs from exchange transactions are derived from the following:
a. Sale of goods or provisions of services to third parties or to other NGAs.
1. Service Income 2. Business Income
b. Use by other entity of assets yielding interest, royalties and dividends or similar distributions.
1. Interest income – charges for the use of cash or cash equivalents, or amounts due to the
entity;
2. Royalties – fees paid for the use of entity’s assets such as trademarks, patents, software, and
copyrights; and
3. 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 and Measurement of Revenue from Exchange Transactions
Revenue from exchange transaction shall be measured at fair value of the consideration
received or receivable.
1. Revenue from the sale of goods shall be recognized when all the following conditions have
been satisfied:
(i.) The entity has transferred to the purchaser the significant risks and rewards of ownership of
the goods; (ii.) The entity retains neither continuing managerial involvement to the degree
usually associated with ownership nor effective control over the goods sold; (iii.) The amount of
revenue can be measured reliably; (iv.) It is probable that the economic benefits or service
potential associated with the transaction will flow to the entity; and (v.) The costs incurred or to
be incurred in respect of the transaction can be measured reliably.
2. Revenue from the supply of services shall be recognized on a straight line basis over the
specified period of the services unless an alternative method better represents the stage of
completion of the transaction.
(i.) The amount of revenue can be measured reliably; (ii.) It is probable that the economic
benefits or service potential associated with the transaction will flow to the entity; (iii.) The stage
of completion of the transaction at the reporting date can be measured reliably; and (iv.) The
costs incurred for the transaction and the costs to complete the transaction can be measured
reliably.
3. Revenue arising from the use by others of entity assets yielding interest, royalties and
dividends or similar distributions shall be recognized when it is probable that the economic
benefits or service potential associated with the transaction will flow to the entity; and the
amount of the revenue can be measured reliably.
When goods or services are exchanged or swapped for goods or services which are of a
similar nature and value, the exchange is not regarded as a transaction which generates
revenue. However, when goods are sold or services are rendered in exchange for dissimilar
goods or services, the exchange is regarded as a transaction which generates revenue.
Example: Entity A is authorized to print
accounting manuals for sale to other
NGAs. Assume that on July 16, 2014,
Entity A sold accounting manuals on
account with a list price of P100,000
less trade discounts of 10%, 10% and
5%. The invoice price of the
merchandise is computed as follows:

Impairment Losses and Allowance

for Impairment Losses. When an
uncertainty arises about the collectability of an amount already included in revenue, the
uncollectible amount, or the amount in respect of which recovery has ceased to be probable, is
recognized as an expense (impairment losses), rather than as an adjustment of the amount of
revenue originally recognized.
Revenue from Non-Exchange Transactions
Most NGAs derive revenues from transactions where they receive resources and provide no or
nominal consideration directly in return. These are as follows:
a. Tax Revenue c. Shares, Grants and Donations
b. Fines and Penalties
d. Revenue from non-exchange transactions may also arise when, in respect of an inflow of
resources from a non-exchange transaction, the entity satisfies a present obligation recognized
as a liability which may be as follows:
1. Trust Liabilities – Customers’ Deposits Payable and Guaranty/Security Deposits Payable
2. Deferred Credits – Deferred Finance Lease Revenue and Other Deferred Credits
3. Unearned Revenue – Investment Property and Other Unearned Revenue
Recognition of Revenue from Non-Exchange Transactions. The cash basis of accounting
shall be applied by all government agencies in the recognition of revenue from non- exchange
transaction until a reliable model of measurement of this revenue is developed.
a. Taxation revenue shall be determined at a gross amount. It shall not be reduced for expenses
paid through the tax system.
b. Gifts and donations, other than services in kind shall be recognized as assets and revenue
c. Goods in-kind received without conditions shall be recognized as revenue immediately.
d. Donation in cash or in kind shall be recognized as revenue.
Measurement of Revenue from Non-Exchange Transactions
Revenue from non-exchange transactions shall be measured at the amount of the
increase in net assets recognized by the entity, unless it is also required to recognize a liability.
Where a liability is recognized and subsequently reduced, because the taxable event occurs, or
a condition is satisfied, the amount of the reduction in the liability will be recognized as revenue.
Sec. 15. Measurement of Liabilities on Initial Recognition.
When the time value of money is material, the liability should be measured at the present value
of the amount expected to settle the obligation.
Sec.16. Tax Revenue.
Taxes are economic benefits or service potential compulsory paid or payable to public sector
agencies in accordance with laws and regulations.
Two Types of Tax Revenues
 1. Direct Taxes- Tax that a person or an organization pays directly to the entity that
imposed it.
2. Indirect Taxes- Taxes that can be shifted from one individual to another.
Taxes do not include fines or other penalties imposed for breaches of the law.
Sec.17. Illustrative Accounting Entries- Refer to the Annexes H to N.
Sec.18. Transfer of Internal Revenue Allotment
When the proceeds collected by NGAs are transferred to LGUs, the latter will recognize the
assets and revenue for the transfer.
Accounting Entry at the books of DBM:
Account Title Account Code Debit Credit
Financial Assistance to LGUs 50214030 P10, 000
Cash Modified Disbursement
System (MDS), Regular 10104040 P10, 000

Sec. 19. Expenses paid through Tax System and Tax Expenditures.
Taxation revenue shall be determined at gross amount. It shall not be reduced for expenses
paid. Expenses paid by the government through tax systems or as reduction from tax revenue
received should not be offset or deducted from tax revenue.
Sec.20. Taxation Revenue Shall not be Grossed Up for the Amount of Tax Expenditures.
Tax expenditures are preferential provisions of the tax law that provide certain taxpayers with
concessions that are not available to others.
Tax expenditures are foregone revenue, not expenses.
It does not give rise to inflows and outflows of resources.
Tax expenditures do not give rise to assets, liabilities, revenue or expenses of the government.

Sec.21. Recognition of Assets Transfers.

An entity shall recognize an asset in respect of transfers when it meets the definition of an
asset. The transfer satisfy the criteria for recognition as an asset when it is probable that the
inflow of resources will occur, and their fair value can be reliably measured.
Sec. 22. Measurement of Transferred Assets.
Transferred assets are measured at their fair value as at the date of acquisition.
Sec. 23. Debt Forgiveness and Assumption of Liabilities.
When the lenders waive their right to collect a debt owed by a public sector entity, it effectively
cancels the debt
In respect of debt forgiveness, the entity will recognize the revenue when the debt no longer
meets the definition of a liability.
Where a controlling entity forgives debt owed by a wholly controlled entity, the assumption of
the transaction may be a contribution from owners.
The revenue that arise from debt forgives is measured at carrying amount of the debt forgiven.
Sec.24. Recognition and Measurement of Fines.
Fines are recognized as revenue when the receivable meets the definition of an asset and
satisfies the criteria for the recognition of asset.
When the entity collects fine with the capacity of an agent, the fines collected will not be
recognized as the revenue of the collecting entity.
Assets arising from fines are measured at the best estimate of inflows of resources to the
entity.
Sec.25. Recognition and Measurement of Bequests.
Bequests that satisfy the definition of an asset are recognized as an asset and revenue when it
is probable that the future economic benefits will flow to the entity and the fair value of the
assets can be reliably measured.
The fair value of a bequeathed asset is determined in the same manner as gifts and donations.
Sec.26.Recognition and Measurement of Gifts, Donations and Goods-in-Kind.
Gifts and Donations are recognized as an asset and revenue when it is probable that the future
economic benefits or service potential will flow to the entity and the fair value of the assets can
be measured reliably.
Goods-in-Kind are tangible assets transferred to an entity in a non-exchange transaction without
charge but may be subject to stipulation.
When there are conditions attached, Goods-in-Kind are recognized as a liability which is
reduced and recognize revenue when the conditions are satisfied.
On initial recognition, gifts and donations including goods-in-kind are measured at their fair
value as the date of acquisition.
Sec.27. Grant with Condition
If conditions are attached to a grant, a liability is recognized which is reduced and revenue
recognized as the conditions are satisfied.
When an entity satisfies an obligation from a non-exchange transaction recognized as an asset,
it shall reduce the carrying amount of the liability recognized and recognize an amount of
revenue equal to that reduction.
Sec.28. Recognition and Measurement of Services in-Kind.
These services meet the definition of an asset because the entity controls a resource from
which future economic benefits or service potential is expected to flow to the entity. These
assets are, however, immediately consumed and a transaction of equal value is also recognized
to reflect the consumption of these services in-kind.
Sec.29. Recognition and Disclosure of Pledges.
Pledges do not meet the definition of an asset because the recipient entity is unable to control
the access of the transferor to the future economic benefits embodied in the item pledged.
Sec.30. Advance Receipts of Revenue.
When an entity receives resources before a transfer arrangement becomes binding, the
resources are recognized as an asset when they meet the definition and satisfy the criteria for
recognition as an asset and recognized as a liability until the event that makes the transfer
arrangement binding occurs, and all other conditions under the agreement are fulfilled.
Sec.31. Recognition and Measurement of Concessionary Loans.
An entity considers whether any difference between the transaction price (loan proceeds) and
the fair value of the loan on initial recognition is non-exchange transaction.
Where a present obligation exists, it is recognized as a liability. As the entity satisfies the
present obligation, the liability is reduced and an equal amount of revenue is recognized.