Accounting for target funding and target revenues

In business, it is very important to monitor the adequacy of accounting for financial revenues. Given the specifics of these resources, accounting must ensure transparency in reflecting their movement and use. Incorrect accounting can lead to the imposition of significant financial sanctions on the enterprise.

The concept of target financing and target revenues

Targeted financing should be understood as funds, assets, resources received by an enterprise from other persons, state funds, with the condition of their use for specific purposes. As can be seen from the definition itself, such receipts include not only money, but also goods and services.

The essence of these concepts is also revealed in the description of account 48, given in the Instruction approved by Order of the Ministry of Finance № 291. According to this Instruction, sources of targeted financing may be:

• non-refundable financial assistance from the state or other persons;
• funds allocated from the budget for specific purposes;
• financial resources accumulated in state funds;
• targeted contributions from individuals and legal entities (in particular, humanitarian aid);
• other similar receipts.

For details, account 48 contains the corresponding subaccounts intended for accounting for individual categories of target revenues:

• 481 – exempt from taxation in connection with the benefits provided;
• 482 – received directly from the state or local budgets, as well as from various state funds;
• 483 – received as charitable assistance;
• 484 – other resources that are not reflected in any of the above subaccounts.

Basic accounting rules for target financing and target revenues

Evaluation of assets received free of charge

The assessment of target finances directly affects the transparency of the transaction in accounting statements. It is worth noting that the initial cost of such assets is determined by their fair value on the date of receipt – the amount at which the asset can be sold or liabilities paid. Market prices for similar funds, goods or services can be used for determination. Clients often also use valuation services from independent experts in this field.

Recognition of income from earmarked financing and earmarked revenues

Let’s consider the main cases of such recognition:

1. funds for non-profit organizations – recognized as income only after its actual receipt and with confirmation;
2. current assets – recognized as income during those reporting periods in which expenses were actually incurred;
3. non-current assets – recognized as income during the period of use in proportion to the amount of accrued depreciation.

Other features regarding the moment of recognition of the specified revenues as income of the enterprise and, accordingly, the deadline for paying tax on such revenues (if it is not humanitarian aid) can be found in the National Accounting Standard 15 “Income”. You can also contact qualified accountants “Prikhodko and Partners” for online consultation to receive information more quickly.

Accounting for humanitarian (charitable) aid

Accounting for humanitarian aid has its own specific rules, defined by Order of the Ministry of Finance of Ukraine No. 298. For non-profit organizations that most often receive this type of aid, we can list the main accounting entries:

1. receipt of target revenues – D-30 and K-48;
2. transfer of funding – D-48 and K-30;
3. use of aid to ensure statutory activities – D-48 and K-745.

Analytical accounting of target funding and target revenues

To ensure effective control over the movement of resources, it is important to properly prepare analytical accounting, which is maintained in the context of each individual program, project, event, etc. Here are the main examples of maintaining such accounting:

• firstly, for budget funds (opening analytical accounts to subaccount 482 under the names of the relevant budget programs);
• secondly, for charitable assistance (opening accounts to subaccount 483 under the names of charitable foundations or organizations);
• finally, for other contributions from individuals and legal entities (opening analytical accounts to subaccount 484 under the names of projects or events, as well as organizations that have provided the relevant contributions).

How can we help?

Qualified accountants of the law firm “Prikhodko & Partners” can provide comprehensive support for enterprises and non-profit organizations. Their services include:

1. consultations on accounting for target funding and revenues;
2. accounting for the specified resources;
3. preparation of accounting statements;
4. tax accounting of transactions;
5. full accounting support for the client (taking into account all the services listed above).

By contacting our accountants, you can count on qualified assistance in organizing and maintaining accounting for target financing. To obtain information about the cost of such a service, we recommend that you contact us by filling out the form below.