DEFERRED REVENUE

GENERAL

Generally Accepted Accounting Principles (GAAP) require the State to recognize revenues in its government-wide financial statements in the fiscal year in which the earnings process is complete, or virtually complete.  Revenues collected in advance of the earnings process must be recorded as deferred revenues, a liability account, for financial statement purposes.

PROCEDURE FOR THE CURRENT FISCAL YEAR

  1.  Identify STARS revenues collected by your agency that need to be considered for deferral.  Refer to Appendix E-2 of the GAAP Closing Procedures Manual for a listing of STARS Revenue Object Codes that fall within the following Miscellaneous Revenues GAAP categories: 

       a.    Licenses, Permits, and Fees (GAAP Revenue Object Code 0050).

       b.   Charges for Sales of Services and Commodities (GAAP Revenue Object Code 0200).

  1. Determine which of the STARS revenues identified in (1) above must be deferred by your agency.  Refer to the ACCOUNTING PRINCIPLES AND POLICIES section of the Miscellaneous Revenues Closing Package (Section 3.4 of the GAAP Closing Procedures Manual) for the accounting policies on deferring revenue.
  1. With each cash deposit, calculate the unearned portion of each STARS revenue object code subject to deferral in (2) above.

Use Transaction code 207, Receipt-Deferred Revenue, to deposit cash to be classified as deferred revenue in the current fiscal year.  This transaction code debits Cash and credits the deferred revenue account, Other Revenues Collected in Advance.  See Example.
  1. Use Transaction code 651, Refund Deferred Revenue, if it is necessary to refund a receipt originally deposited via transaction code 207.  See Example.
  1. If a portion of the current year’s receipts recorded as deferred revenue have been earned by the end of the current fiscal year, follow the procedure below (using Transaction code 055) to reclassify the appropriate portion of Deferred Revenue as Revenue.

PROCEDURES FOR BALANCES BROUGHT FORWARD FROM THE PRIOR FISCAL YEAR

"Other Revenues Collected in Advance" is a liability account (General Ledger Account 223). Its balance, therefore, automatically carries forward from one fiscal year to the next. The balance in this account appears on the CSA 458, Interim Balance Sheet report.

Use Transaction code 055, Reclassify Deferred Revenue, to reclassify as revenue those amounts that were classified as deferred revenue when deposited.  This transaction code debits Other Revenues Collected in Advance and credits Revenues.  See Example.

           Exception:

The procedures in this section of the STARS Agency User’s Manual do not apply to revenues collected and deposited in the State’s Budgetary General Fund.  Therefore, amounts budgeted as revenues in the State’s Budgetary General Fund for the current fiscal year should not be processed on STARS as deferred revenue.  Instead, your agency is responsible for contacting the Central State Financial Reporting Division to discuss alternative procedures for reporting deferred revenue for GAAP purposes.

You may  view Sample documents illustrating deferred revenue transactions by  click on the links below.

BANK DEPOSIT

 

JOURNAL VOUCHER - RECLASSIFY DEFERRED REVENUE

 

DISBURSEMENT VOUCHER - REFUND OF DEFERRED REVENUE

 

IMPACT OF TRANSACTIONS ON GENERAL LEDGER

Transaction
Code

 

055

Reclassify Deferred Revenue
Debit: GLA 223 Other Revenues Collected in Advance
Credit: GLA 300 Revenue

207

Receipt Deferred Revenue
Debit: GLA 101 Cash
Credit: GLA 223 Other Revenues Collected in Advance

651

Refund Deferred Revenue
Debit: GLA 223 Other Revenues Collected in Advance
Credit: GLA 101 Cash

 

Trans
Code

Transaction
Code Title

General
Debit

Ledger
Credit

055

207

651

Reclassify Deferred Revenue

Receipt Deferred Revenue

Refund Deferred Revenue

223

101

223

300

223

101