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Accounts Receivable Handout PDF
Accounts Receivable Handout PDF
2. Nontrade Receivables are claims arising from P120,000 -balance P 150,000- collection
other sources.
NTR are classified as current when realizable
in cash within one year. P 30,000 -
credit balance
Examples of NTR The credit balance should not be offset against the
1. Advances to, receivable from, due from, debit balance. So an adjusting entry is needed to
shareholders, directors or employees. (If silent, eliminate the credit balance.
classified as current)
2. Advances to affiliates/subsidiary Accounts receivable P30,000
(Noncurrent) Customers’ credit balances P30,000
3. Advances to supplier for purchase or goods.
*This example is same as with the Creditor’s account.
(Current)
4. Subscription Receivable are current asset if Other examples:
collectible within one year. If the problem is
silent, it is a deduction from Subscribed share 1. Trade receivables including customer’s credit balance
P 1,500,000
capital. of P150,000)
5. Special deposits on contract, normally,
Answer: (1,500,000 + 150,000) = P 1, 550,000
noncurrent. BUT if collectible within a year,
classified as current. 2. Debit balance in Accounts Payable of P150,000.
6. Accrued dividends receivables, accrued rent
income, accrued royalties, accrued interest, Answer: Should be included in accounts receivable
classified as current. and not offset against the balance of Accounts Payable.
7. Claims receivables (current)
8. Creditor’s account (debit balance in accounts Financial Asset is initially measured at fair value
plus transaction costs that are directly attributable
payable) due to overpayment, returns, and
to the acquisition.
allowances are presented as part of current Accounts Receivable, a short term receivable, is
asset and NOT OFFSET AGAINST ACCOUNTS recorded initially at face amount or original
PAYABLE. invoice amount.
Trade and non trade receivables that are *For short term receivables, fair value is equal to face
currently collectible are combined and presented amount.
on statement of financial position as a one line
item called “Trade and other receivables.”
Accounts receivable shall be measured
subsequently at Net Realizable Amount (NRA) Direct write-off
NRA- amount of cash expected to be collected or No entry must be made if accounts are only doubtful of
the estimated recoverable amount. collection. No allowance account is set-up.
When accounts are proven to be worthless, expense is
In estimating NRA of trade receivables, the ff. recognize and accounts receivable is credited.
deductions are made: If during the year, the account previously written off
a) Allowance for freight charge has been collected, the two methods are the same.
b) Allowance for sales return If the account previously written off is collected in the
c) Allowance for sales discount subsequent period, entries are:
d) Allowance for doubtful accounts
Accounts receivable xx
Allowance for freight charge Doubtful Accounts xx