[jopa16]

So… from what I gather revenues are recorded when money is collected from sales and income taxes, but I am getting conflicting information about when revenue is recognized for property taxes and fines. Is it only a receivable that is recorded in this situation before collection? My Becker book says so but then shows an example where revenues are recognized when levied.

REG 2/26/14 - 90
BEC 4/08/14 - 92
FAR 5/31/14 - 90
AUD 7/09/14 -

[WanderingAcct]

I am studying for FAR too. This is my best understanding of the topic…

Property taxes and fines/fees are imposed nonexchanges. Unlike sales taxes, income taxes, and other derived taxes, for imposed nonexchanges you know exactly how much you expect to receive, because the tax isn't dependent upon an activity like sales or taxpayer income.

For imposed nonexchanges you can book the revenue when the property tax/fine/fee is levied as long at it meets the available criteria, meaning you are going to collect it this year or within 60 days of year end. If you expect to collect it more than 60 days after year end, its a deferred inflow of resources.

Let's say you levied $700,000 in property taxes for this year. You expect to collect $400,000 by year-end, $100,000 by February 28th, and the rest of it after Feb. 28th, other than 10% which you expect to be collectible.

Here's the journal entry when the taxes are levied:

Dr. Property Taxes Receivable $700,000

Cr. Revenues – Property Taxes $500,000

Cr. Deferred Inflow of Resources $130,000

Cr. Allowance for uncollectible taxes receivable $70,000

So the result of this journal entry is that your property taxes receivables, net of the allowance, is $630,000, which is the amount you expect to collect. You've recognized revenues for the amount that meets the available criteria (that which you will collect this year and within 60 days of year end), and you've recorded a deferred inflow for the taxes you expect to collect that won't meet the available criteria.

FAR - 99 (5/14)
AUD - 89 (8/14)
REG - 93 (4/15)
BEC - 5/18/15

NINJA Framework: Ninja Notes & Becker

[WanderingAcct]

I am studying for FAR too. This is my best understanding of the topic…

Property taxes and fines/fees are imposed nonexchanges. Unlike sales taxes, income taxes, and other derived taxes, for imposed nonexchanges you know exactly how much you expect to receive, because the tax isn't dependent upon an activity like sales or taxpayer income.

For imposed nonexchanges you can book the revenue when the property tax/fine/fee is levied as long at it meets the available criteria, meaning you are going to collect it this year or within 60 days of year end. If you expect to collect it more than 60 days after year end, its a deferred inflow of resources.

Let's say you levied $700,000 in property taxes for this year. You expect to collect $400,000 by year-end, $100,000 by February 28th, and the rest of it after Feb. 28th, other than 10% which you expect to be collectible.

Here's the journal entry when the taxes are levied:

Dr. Property Taxes Receivable $700,000

Cr. Revenues – Property Taxes $500,000

Cr. Deferred Inflow of Resources $130,000

Cr. Allowance for uncollectible taxes receivable $70,000

So the result of this journal entry is that your property taxes receivables, net of the allowance, is $630,000, which is the amount you expect to collect. You've recognized revenues for the amount that meets the available criteria (that which you will collect this year and within 60 days of year end), and you've recorded a deferred inflow for the taxes you expect to collect that won't meet the available criteria.

FAR - 99 (5/14)
AUD - 89 (8/14)
REG - 93 (4/15)
BEC - 5/18/15

NINJA Framework: Ninja Notes & Becker

[Anonymous]

Yes Property Tax and Fines are imposed non-exchange. They are recognized as revenue when billed.

Sales tax and income tax are derived non-exchange. They are recognized when received.

[Anonymous]

Yes Property Tax and Fines are imposed non-exchange. They are recognized as revenue when billed.

Sales tax and income tax are derived non-exchange. They are recognized when received.

[Topsya]

hey @jopa16

an off-topic…. what does your nickname mean?

AUD - 90
FAR - 83
BEC - 81
REG - 80
ETHICS - 100

[Topsya]

hey @jopa16

an off-topic…. what does your nickname mean?

AUD - 90
FAR - 83
BEC - 81
REG - 80
ETHICS - 100

[jopa16]

Thanks everyone. That really helped. And Topsya, those are the first two letters of my first and last name, I'm a PSU grad, and 16 was my hockey number.

REG 2/26/14 - 90
BEC 4/08/14 - 92
FAR 5/31/14 - 90
AUD 7/09/14 -

[jopa16]

Thanks everyone. That really helped. And Topsya, those are the first two letters of my first and last name, I'm a PSU grad, and 16 was my hockey number.

REG 2/26/14 - 90
BEC 4/08/14 - 92
FAR 5/31/14 - 90
AUD 7/09/14 -

[Author]

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