[Eiman.kuwait]

Government-Wide Financial Statements and Fund Financial
Statements—Property Taxes Prepaid for Year Two Year 1

Cash 28,500
Deferred Property Tax Revenues 28,500
To record collection of property tax prior to the start of the levy year after reduction for 5 percent discount.

Assume that city officials expect to collect 96 percent of the remaining $500,000 in
assessments, or $480,000. At the beginning of Year 2, both this receivable and the related
revenue can be recognized. The receivable is reported at that time because an enforceable
claim comes into existence. For government-wide statements, the revenue is reported in
Year 2 because that is the period in which the money can first be used. In the following
journal entry, (((note that the revenue is reduced directly by the estimate of taxes that are
expected to be uncollectible))). In addition, the previously collected amount is recognized in
Year 2 as revenue because, once again, this is the period for which use is allowed.
Government-Wide Financial Statement—Property Taxes for Year Two January 1, Year 2

Property Tax Receivable 500,000
Allowance for Uncollectible Taxes 20,000
Revenues—Property Taxes 480,000
To recognize property tax assessment for Year 2.

Deferred Property Tax Revenues 28,500
Revenues—Property Taxes 28,500
To recognize property tax proceeds for Year 2 collected during Year 1.

why saying reducing revenue by the uncollectible amount? the allowance is related to accounts receivable not related to revenues, right ??

[Missy]

Yes it reduces net receivables but thats only one side of the entry. The offset to the receivables reduction is going to be a reduction of revenue.

Licensed Massachusetts Non Reporting CPA since 2012
Finance/Admin/HR Manager

[Eiman.kuwait]

ِahaa you are right! ok I got it!
its saying reduced directly, that means they are referring to the revenue entry which is amount of 480 which is reduced already from 500 to 480, not the allowance entry which is 20.
thanks alot

[Author]

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