In: Accounting
Anytown's fiscal year end is June 30. Anytown sends out its real estate tax bills on July 1, 20X1. The billings amount to $5 million, which 25% is due August 1 20X1, 25% is due December 1, 20X1, and 50% is due February 1, 20X2. What amount of these billings should Anytown recognize as revenue in its June 30, 20X1 governmental fund financial statements?
Under the Modified Accrual Accounting for Governmental funds, |
One-side ,ie. Debit side of the journal entry-ie. The current asset-Taxes receivable will be for the full amount of $ 5 million , on the Billing date(when individual bills, for the amounts due, are raised, ie. July 1, 20X1)- so, recivable is recognised in the fiscal for which it is levied,ie. June 30, 20X1. |
But, for the credit-side of the entry, ie. Income/revenue to be recognised, |
for revenue to be recognised in any fiscal year, it should be both measurable and available, even,if levied. |
So, |
by June 30, 20X1, as none of the revenue were received, |
NO revenue is RECOGNISED , on this date. |
The due dates themselves are beyond June 30, 20X1 |
Instead ,the credit side of the entry will be: |
On the date of the billing, ie. July 1,20X1,the full $ 5 million is recorded/ credited to Unavailable revenue(a deferred inflow of resources) |
The Journal entry will be: |
Debit Property Taxes receivable 5000000 |
Credit Unavailable Revenues 5000000 |
Under full accrual basis, |
The debit side-ie. Receivable is recorded --same as under Modified Accrual basis. |
Whereas, as for as the credit side of the journal entry, |
revenue is recognised in the fiscal year , for which it is levied, irrespective of when it is due or received. |
That said, under Full accrual, even though the bill date is July 1, 20X1, full amount of $ 5 million is recognised as revenue, on June 30, 20X1 |
The Journal entry will be: |
Debit Property Taxes receivable 5000000 |
Credit Property tax Revenues 5000000 |