A village derives about .005 percent of its General Fund revenues from traffic violation fines.Violators of the law have 30 days to appeal the fines.Experience shows that the village ultimately collects on about 75% of the violations.When should the village recognize these revenues in the General Fund?

Question

Quizplus · Accepted Answer

The village should recognize the revenues in the General Fund when the cash is collected because that is when the revenue is actually earned and realized. Recognizing the revenue earlier (e.g. when the budget is prepared or at the beginning of the year based on an estimate of collections) would be premature and could result in overstating revenue and misleading financial statements. Therefore, the best practice is to recognize the revenue when it is earned and collected.

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