Part B - Transactions in revenue and expense

Transactions represent economic flows that are interactions between institutional units by mutual agreement or through the operation of the law (see Chapter 4 of this manual for further information on transactions). The GFS statement of operations records transactions that increase or decrease net worth in the form of revenue (ETF 11) and expenses (ETF 12), but excludes economic flows such as holding gains and losses (ETF 51) and other changes in the volume of assets and liabilities (ETF 52).

Revenue (ETF 11) is defined as an increase in net worth resulting from transactions. The main way that governments raise revenue is through the imposition of taxes on individuals and businesses, sales of goods and services, property income, other current revenue, and capital revenue.

Paragraph 4.23 of the IMF GFSM 2014 states that the disposal of a non-financial asset by sale or barter is not considered to be revenue because it has no effect on net worth. Rather, it changes the composition of the balance sheet by exchanging one asset (the non-financial asset) for another (the proceeds of the sale). Similarly, amounts receivable from loan repayments and loan disbursements are not considered to be revenue.

Expenses (ETF 12) are defined as the decrease in net worth resulting from transactions. The most common types of expenses for most public sector units are employee expenses and transfer expenses. Expenses are incurred by public sector units when supplying goods and services to the community.

Paragraph 6.2 of the IMF GFSM 2014 states that a government unit may generate expenses by producing goods and services itself and distributing them, purchasing them from a third party and distributing them, or transferring cash to households so they can purchase the goods and services directly.