ADJUSTMENTS FOR THE ACCRUAL BASIS OF ACCOUNTING (2)
Each government’s tax procedures and requirements are different, and different taxes work in different ways, so there is no set of prescribed procedures that can be suggested that will result
in the best method in every case. Nevertheless, there are some general processes and procedures that might prove helpful.
In the example described above, the government would probably be best off breaking the various tax events into groups and handling each in the most practical way. For example, withholding taxes are based on salary earnings and usually must be remitted to governments in a very short period of time. Perhaps withholding taxes received during the year should be recognized by the government in the year received. Similarly, estimated tax payments are often received quarterly and should correspond
with estimates of earnings for each particular quarter. The estimated tax receipts related to the four quarters that comprise the government’s fiscal year might be assumed to be recorded within that fiscal year. Tax payments received with returns and refunds made with returns filed on a timely basis (or received with extension request) might be aggregated and assumed to occur ratably over the calendar year. Accordingly, of the amounts received (or refunded) for calendar year 20X0, the government might assume that half were received in its 20X0 fiscal year and half in its 20X1 fiscal year. Projection of the first half of 20X2 would be needed and could be based on past history and adjusted for known factors, such as changes in tax rates or rising or declining incomes. Further, the government might determine that the amounts received or paid with amended returns is very small and may choose to simply account for these in the same period received or paid.
Note that not all derived tax revenues will be this difficult to calculate. For example, many governments require that sales taxes be remitted on a monthly basis. It should be fairly easy to
match the receipts of sales tax revenues to the months of the fiscal year to which those taxes relate. For example, for a June 30 year-end, if sales taxes relating to the month of June are due to be remitted by July 20, the government would accrue the July receipts back to June, since that is when the sales on which the sales tax revenues were derived occurred.
Taken From : Governmental Accounting Made Easy