[martimann]

Hello guys,

I’ve come across a few questions on Ninja MCQ’s regarding derived revenue for governmental accounting, specifically with sales taxes. Ninja MCQ’s answers state that the government entity has to recognize revenue in the period the taxed sales transaction took place.

However, Becker states that derived revenue (sales taxes and income taxes) can only be recognized when received. CPAexcel also follows this rule in their MCQ’s.

I don’t recall being a change by GASB recently, or am I missing anything new? Any feedback would be of great help thanks.

Here’s the ninja MCQ :
A state imposes a 5% tax on sales of goods by retail merchants. Legislation requires the state (provider) to remit one-sixth of the sales tax to cities and counties (recipients) on a quarterly basis. No annual appropriation is required. The cities and counties may use the resources for any governmental program.

When would the provider recognize a revenue?

A.When the tax is collected

B.When the underlying transaction takes place

C.When the money is distributed to the recipient

D.When all eligibility requirements have been met

Sales taxes are derived tax revenues, per GASB N50.104. Revenues from derived tax revenues are recognized in the period when the underlying exchange has occurred (i.e., in the period the taxed sales transaction took place).