As part of the procedure you are assigned to prepare a Bank Reconciliation and Adjusting

Journal Entries for the Tikoy Talap Corporation for the month ended June 30, 2015. The
unadjusted cash balances are as follows:

Cash balances per Bank statement, June 30, 2015 …………P249,223.00

Cash balance per company records, June 30, 2015………….248,758.80

The Bank statement disclosed the following information:

1. A customer note for P24,000 plus P240 interest was collected on June 30, 2015.
CREDIT MEMO OK
2. A customer check for P2,762.80 was returned because of insufficient funds (NSF
check) DEBIT MEMO OK
3. The month service charge was P300. DEBIT MEMO

A review of the company records disclosed the following:

1. A deposit for P22,857.40 mailed to the bank on June 29,2015 did not appear on the bank
statement. DEPOSIT IN TRANSIT
2. Customer checks totaling P6,548.00 were on hand at the end of June awaiting deposit.
3. The following company checks were outstanding at the end of June:
# 862 ………………………………………….P1,923.80
# 864………………………………………….. 2,943.60
# 865……………………………………………5,265.00
4. Check # 843 written for P1,824.00 in payment of a creditor account and included with the
cancelled checks in the bank statement has been erroneously recorded as P384.00 in the
company record.

ADJUSTED BALANCE JUNE 30

BALANCE PER BANK STATEMENT BALANCE PER COMPANY RECORDS

249,223.00 UNADJUSTED
22,857.40 ADD DEPOSIT IN TRANSIT (DIT)
6,548.00 DIT = 29,405.40
10,132.4 LESS OUSTANDING CHECK
=268,496.00 ADJUST BANK BALANCE
248,758.80 UNADJUSTED
24,000 ADD CREDIT MEMO JUNE NR COLL.
240 INT. = 24,240
(2,762.80) LESS DEBIT MEMO
(300) DEBIT MEMO SERVICE CHARGE
(1,440.00) BOOK ERROR
= 268,496.00 ADJUST BOOK BALANCE
LAPPING

EXAMPLE:

CUSTOMER 1 10,000 (IBUBULSA NG CASHIER) ASSIGNED OTHER BOOKKEEPER NOT THE CASHIER

CUSTOMER 2 15,000 10,000+5,000 MGA BINULSA

CUSTOMER 3 20,000 15,000+5,000 (PADALHAN SULAT IS IT TRUE NA KULANG YUNG BAYAD)

GO TO THE RECORDS CHECK WHO IS NOT SETTLED AND IN THAT RECORDS YOU WILL SENT A LETTER OF
CONFIRMATION

KITING

EXAMPLE: JANUARY 29 CUT OFF 30 TH OF THE MONTH

BANK A 5,000,000 BANK B 3,500,000 INCREASE 4,000,000

(PARA MADETECT GAGAWA NG PROOF OF CASH)

500,000

Laison Officer

ACTIVITY #2

CASH IN BANK (COMPANY)

DEBIT (BOOK RECIPT) CREDIT (BOOK DISBURSEMENT)

JUNE 30 BALANCE 1,000,000 BOOK CREDITS 3,600,000
BOOK DEBITS JUNE 4,000,000
JULY 31 UNADJUSTED BALANCE 1,400,000 (TOTAL DEBIT – TOTAL CREDIT)

BANK STATEMENT (BANK)

BANK DEBIT BANK CREDIT

BANK DEBITS 2,500,000 JUNE 30 BALANCE 1,650,000
BANK CREDITS 3,500,000
JULY 31 UNADJUSTED BALANCE 2,650,000 (TOTAL CR – TOTAL DR.)

BANK JUNE BOOK JUNE

UNADJUSTED BANK BALANCE JUNE UNADJUSTED BOOK BALANCE JUNE
1,650,000 1,400,000
ADD DIT JUNE 400,000 ADD CM JUNE 300,000
LESS OC JUNE 854,000 ADD DM JUNE 104,000
ADJUSTED BALANCE JUNE 30 1,196,000 ADJUSTED BALANCE JUNE 30 1,196,000
 BANK JULY BOOK JULY
UNADJUSTED BANK BALANCE JULY 2,650,000 UNADJUSTED BOOK BALANCE JULY 1,400,000
ADD DIT JULY 1, 100,000 ADD CM JULY 500,000
LESS OC JULY (1, 851,000) LESS DM JULY 1,000
ADJUSTED BALANCE JULY 31 1,899,000 ADJUSTED BALANCE JULY 31 1,899,000

DEPOSIT IN TRANSIT JUNE 30 400,000

ADD: DEPOSIT MADE BY THE COMPANY DURNG JULY 3,700,000 BOOK DEBITS-CM LAST
MONTH

TOTAL 4,100,000

LESS: DEPOSITS ACKNOWLEDGE BY BANK IN JULY 3,000,000 BANK CREDITS - CM THIS

MONTH

DIT JULY 1,100,000

OUTSTANDING CHECKS JUNE 854,000

ADD: CHECKS RELEASED BY COMPANY JULY 3,496,000 BOOK CREDITS - DM LAST

MONTH

TOTAL 4,350,000

LESS: CHECKS CLEARED BY THE BANK 2,499,000 BANK DEBITS - DM THIS

MONTH

CASH IN BANK (COMPANY)

DEBIT BOOK RECIPT CREDIT BOOK DISBURSMENT

JUNE 30 BALANCE 1,000,000 CHECKS RELEASED 3,496,000
DEPOSITS MADE 3,700,000 DM JUNE 104,000
CM LAST MONTH 300,000
ERROR ADJ.

UNADJUSTED JULY 31 BALANCE 1,400,000

BANK STATEMENT

BANK DEBIT BANK CREDIT

CHECKS CLEARED BY BANK 2,499,000 JUNE 30 BALANCE 1,650,000
DM JULY 1,000 DEPOSITS 3,000,000
CREDIT MEMO JULY 500,000
FAR

1. ACCRUED EXPENSE- EXPENSES INCURRED BUT NOT YET PAID AND NOT YET RECORDED

EXPENSE XXX

PAYABLE XXX

OCTOBER 1 2019 ABC COMPANY BORROWED 100,000

FROM THE BANK WITH THE FOLLOWING TERMS:

payable in 5 months, 12% interest

100,000 x 12% x 5/12= interest expense 5,000

Accounts way

5k x 12 divide by 5 divide by .12 = 100,000

5k x 12 divide by 5 divide 100,000 = 0.12 or the 12%

5k x 12 divide by .12 divide by 100,000 = 5

3,000 2,000

OCT 1 2019 DEC 31 2019 MAR 1 2020 100,000+5,000

PRINCIPAL + INTEREST = MATURITY VALUE

Oct. 1 cash 100,000

notes payable 100,000

7. AJE Dec 11 interest expense 3,000

interest payable 3,000

8. Closing entry revenues xxx (nominal accounts)

expenses xxx

Interest expense 3,000

Income and expense summary xxx

9. Posting trial balance (real accounts)- beginning income of the company this year

10. Jan 1 2020 beginning of next accounting period (reversing entry)

Interest payable 3,000

Interest expense 3,000

March 1 2020 notes payable 100,000

Interest expense 5,000

Cash 105,000

Accrued expense subject to aje

Interest Expense
12/31 3,000 3,000 12/31
5,000 3,000 1/1 kakampi (abang)

Interest Payable
3,000 3,000

1. Accrued Income- income already earned, not yet collected, not yet recorded

-dapat credit yung income

-debit receivable

Receivable xxx

Income xxx

OCTOBER 1 2019 ABC COMPANY BORROWED 100,000

FROM THE BANK WITH THE FOLLOWING TERMS:

payable in 5 months, 12% interest

100,000 x 12% x 5/12= interest expense 5,000

Accounts way

5k x 12 divide by 5 divide by .12 = 100,000

5k x 12 divide by 5 divide 100,000 = 0.12 or the 12%

5k x 12 divide by .12 divide by 100,000 = 5

3,000 2,000

OCT 1 2019 DEC 31 2019 MAR 1 2020 100,000+5,000

PRINCIPAL + INTEREST = MATURITY VALUE

 10/1/19 Notes receivable 100,000

Cash 100,000

12/31/19 step 7 AJE Interest receivable 3,000

Interest income 3,000

Step 8 Closing entries Revenues xxx

Expense xxx

Income & expense summary xxx

Step 9

Step 10 reversing entry Interest Income 3,000

Interest receivable 3,000

March 1 2020 cash 105,000

Note receivable 100,000

Interest income 5,000

Interest Expense
12/31 3,000 3,000 1/1

Interest Income
12/31 3,000 3,000 12/31
Kakampi/abang 3,000 0 1/1
5,000 3/1

November 1 2019 lessee paid P50,000 advance rental for 5 months. (every second yung record ng rent
expense) (intervening period)

Rent expense 20,000 50,000 Prepaid Rent 30,000

11/1/19------------------------------------------ 12/31/19-----------------------------------------------4/1/20

ASSET METHOD Prepaid (immediate payment) Expense EXPENSE METHOD

11/1 Prepaid Rent 50,000 11/1 Rent Expense 50,000
Cash 50,000 Cash 50,000
AJE step 7 AJE STEP7
12/31 Rent Expense 20,000 12/31 Prepaid Rent 30,000
Prepaid rent 20,000 Rent Expense 30,000
Closing step 8 Closing entry step 8
Revenue xxxx Revenue xxxx
Expenses xxxx Expense xxxx
Rent Expense 20,000 Rent expense 20,000
Income and Expense summary xxxx

Post closing – trial balance step 9

Reversing entry Reversing entry

1/1 no reversing 1/1 Rent Expense 30,000
Prepaid expense 30,000
Asset method just ask us what account are we going to debit (prepaid)

Expense method debit the rent expense because it is expense

PREPAID RENT HOW MUCH IS YOUR BALANCE FOR 12/31 (asset method)

HOW MUCH IS THE RENT EXPENSE BALANCE FOR 12/31 (expense method)

Asset method not subject in reversing

Expense method is a subject in reversing

Problem Silent (expense method) kasi 10 step ang meron ang expense method to observe the 10 steps

ASSET METHOD EXPENSE METHOD

Prepaid rent Rent Expense Rent Expense Prepaid rent
50,000 20,000 20,000 20,000 50,000 30,000 30,000
20,000
30,000 30,000

50,000

11/1/19------------------------------------------ 12/31/19-----------------------------------------------4/1/20

Rent Income 20,000 Unearned Rent 30,000

LIABILITY METHOD Unearned INCOME METHOD Rent

11/1/19 Cash 50,000 P11/1/19 Cash 50,000
Unearned Rent 50,000 Rent income 50,000
AJE step 7 AJE step 7
12/31/19 Unearned Rent 20,000 12/31/19 Rent Income 30,000
Rent Income 20,000 Unearned Rent 30,000
Closing entry step 8 Closing entry step 8
Revenue xxxx Revenue xxxx
Rent Income 20,000 Rent Income 20,000
Expenses xxxx Expenses xxxx
I&e summary xxxx I&e summary xxxx
 PC-TB STEP 9 PC-TB STEP 9

Reversing entry step 10 Reversing entry step 10

1/1/20 no reversing entry 1/1/20 Unearned Rent 30,000
Rent Income 30,000

Naearned na kasi yung 20,000

HOW MUCH IS YOUR UNEARNED RENT BALANCE FOR 12/31 (liability method)
HOW MUCH IS THE RENT INCOME BALANCE FOR 12/31 (income method)
Problem Silent (income method) kasi 10 step ang meron ang expense method to observe the 10 steps

LIABILITY METHOD Unearned INCOME METHOD Rent

Unearned Rent Rent Income Unearned Rent Rent income
20,000 50,000 20,000 20,000 30,000 30,000 50,000
30, 000

Provision for doubtful accounts (ALLOWANCE FOR DOUBTFUL ACCOUNTS)

Solvency bankcrupt sa corte na

DWOM (direct write off method) AM (allowance method)

segurista
2019 2019
Doubtful of collection No entry Doubtful accounts expense 10,000
Allowance for DA 10,000

Worthless Accounts Rec Bad debts expense 10,000 Allowance for DA 10,000
AR 10,000 AR 10,000
(pag buo ulit)
Recovery of AR AR 10,000 AR 10,000
Bad debts expense 10,000 Allowance for DA 10,000
2020 AR 10,000 AR 10,000
Miscellaneous Income 10,000 Allowance for DA 10,000

Bad debts kinoclose pero yung allowance for DA hindi kinoclose

Sales 100,000

AR 60,000

ARD 1/1/19 3,000

Problem silent

AJE DAE (DOUBTFUL ACCOUNTS EXPENSE) XXXX 5,400, 3,000

ADA (ALLOWANCE FOR DOUBTFUL ACCOUNTS) XXXX 5,400, 3,000

 DAE doubtful accounts expense Allowance for doubtful accounts ADA
0 3,000 1/1
5,400 5,400
3,000 3,000

INCOME STATEMENT BALANCE SHEET

Sales 100,000 AR 60,000

DAE 5,400 LESS: ADA 12/31/2019 8,400
3,000 6,000

Pag di nakalagay yung sales sa income statement siya

INCREASE BY – INCOME STATEMENT YON
INCREASE TO – BALANCE SHEET
PER AGING – BALANCE SHEET
TO GET ADA given SALES X given SALES PERCENT
For the accounts receivable (given accounts receivable x given % of accounts receivable)
To get the journal entries the ADA (MINUS) GIVEN ADA

Provision for depreciation

According to ias 16, pfrs for impairment all property plant and equip are subject to depreciation with the
exception of land

Land is a generate rule it doesn’t depreciate

Impairment loss

Depreciate the cost of asset

Under usgaap

1. Wear and tear(that we are not permanent) interms of use, how use properly the asset
2. Passage of time (if you don’t use body properly mamatay ka agad)
3. Obsolescence and inadequacy (the asset is young, just bought it now it is already obsolete past)

Slm -straight line method

Cm -composite metod

Dm -

Dbm

150% dbm

200% dbm (dbbm)

Syd
# of hours method

Output method

Production method

Inventory method

Replacement method

Retirement method

Problem silent- look for a pattern (kung ano yung hinahanap)

Slm – taon taon na

Cost - remaining value/sv/rv = depreciation

Estimated useful life (EUL)

10,200,000 – 200,000 = 500,000

20 years (hanggang kelan yung bahay)

Building 10,200,000

Less: Accumulated Depreciation 10,000,000

1,500,000 after 2 year

Scrap value or Salvage value 200,000

Debit depreciation expense 500,000

Credit accumulated depreciation 500,000 (papasok sa balance sheet)

Additional concept of receivables

Pledging/hypothecating

- Refers ro borrowing money from the bank or any financial institute in which in general are used

ASSIGNMEN= Specific receivables

A B C D E = subject to pledge

A 100,000

B 100,000

C 100,000

D 100,000

E 100,000
AR assigned 300,000

AR 300,000

IA

Financial asset vs. non-financial asset

-asset of one company which is liability or equity of other company (MUST BE PAYABLE WITH CASH)

FINANCIAL ASSET

CASH

AR

ALLOWANCE FOR BAD DEBTS

NOTES R

INVESTMENT

NONFINANCE ASSET

PREPAID SUPPLIES

PREPAID RENT

PREPAID INSURANCE

LAND

BUILDING

INVENTORY

Financial liability vs. non financial liability

FINANCIAL LIABILITY- BABAYARAN NG CASH IN THE FUTURE

AP

NOTES P

INTEREST P

SALARIES P

UTILITIES P
NONFINANCE LIA

UNEARNED RENT

FINANCIAL INSTRUMENT

GALING YUNG ASSET SA LIABILITIES AND EQUITY

LIABILITIES GALINGS A CREDITORS(MAY MATURITY/ INVESTMENT INDEPT INSTRUMENTS)

EQUITY GALING SA MGA INVESTORS (NAGINVEST OWNERS/ WALANG MATURITY DATE) {SA CORP
TAWAG IS STOCKHOLDERS/ INVESTMENT IN EQUITY INSTRUMENT}

2 CLASSIF OF RECIEVABLE

TRADE RECIEVABLES

- refer to claims arising from sale of merchandise or services in the ordinary course of the
business operations.
- Trade receivables – generally classified as current because of the concept of normal operating
cycle notwithstanding the period from the reporting date
- AR/customers’ accounts/trade debtors- OPEN ACCOUNTS NOT SUPPORTED BY PROMISORY
- NR- formal claim against another that is evidenced by a written promise called promissory note
also known as time draft.
- Only negotiable promissory note is included as part of notes receivable.
Dishonored notes receivable do not qualify as not receivable in the statement of financial
position as well as overdue notes.
INTEREST BEARING YUNG INTEREST HIWALAY PA
NON-INTEREST KASAMA NA SA AMOUNT

March 1 due date

Jan 1 Notes receivable 100,000

Sales 100,000

March 2 Accounts receivable 102,000

Notes receivable 100,000

Interest income 2,000

NON-TRADE

- These are the receivable that arise from sources other than from the sale of goods or services in
the normal course of the business.

Examples of Nontrade Receivables

 1. Loans to officers, shareholders, directors and employees Noncurrent if due more than
12 months from the reporting
date

2. Advances to affiliates Long-term investment, unless

collectible within one year
(short-term investment)

3. Advances to supplier for acquisition of merchandise Current asset

4. Accrued income receivables such as dividends Current asset

receivable, accrued rent income, accrued royalties
income and accrued interest on bonds investments

5. Deposits to guarantee performance or payment or to Current asset

cover possible damages or losses

6. Deposit with creditors, claims for losses and damages Current asset

7. Claims receivables from common carriers for damaged Current asset

or lost goods; claims against creditors for returned,
damaged or lost goods

8. Claims for tax funds or rebates Current asset

9. Special deposit on contract bids Normally classified as other

noncurrent assets unless
collectible within one year
(current assets)

10. Debit balance of creditors account that may arise from Current asset if material,
overpayments or returns and allowances otherwise it may be netted
against accounts payable with
credit balance.

BAD DEBTS- IMPAREMENT LOSS NA TAWAG

SUBSCRIPTION-

CASH 250,000

SUBCRIPTION REC. 750,000

SUBS. ORDINARY SHARE 1,000,000

ASSET

CURRENT ASSET

COLLECTIBLE WITHIN 1 YR

CASH 250,000

SUBCRIPTION REC. 750,000

LIABILITIES

EQUITY

COLLECTIBLE BEYOND 1 YR

SUBS. ORDINARY SHARE 1,000,000

LESS SUBS. REC. 750,000

CURRENT

1. Current

a. Trade receivables – generally classified as current because of the concept of normal operating
cycle notwithstanding the period from the reporting date [CURRENT]

b. Nontrade receivables – classified as current only if they are reasonably expected to be realized
in cash within 12 months after the reporting date [IT DEPENDS]

Normal operating cycle is the period between the acquisition of material entering into a process (or the
purchase of goods for resale) and its realization in cash or an instrument that is readily convertible into
cash.

2. Non-current – nontrade receivables that are not reasonably expected to be realized in cash
within 12 months after the reporting date.

Date today

Dec 31 2019 Dec 31 2020

Receivables 100,000

Trade Receivable 100,000 12/31/19 noc 6 months 12/31/2020 noc 1yr. & 6
mos 1 yr. & 6 mos and 1 day current asset within a year or the collectable date pag lumagpas hindi na

Non trade receivable 100,000 12/31/2019 12/31/2020 – 1 yr rule lang

PAGPROBLEM SILENT THE ASSUMPTION IS WITHIN CURRENT

NONCURRENT (NONTRADE)

INITIAL RECOG

Layaway sales

Sales where the good are delivered only when the buyer has paid a final installment in a series of
payments

Revenue is recognized when the goods are delivered, when experience most such sales are
consummated revenue may be recognized when a significant deposit is received provide the goods are
on hand, identified and ready for delivery to buyer.

MOVABLE PROPERTY- RECTO LAW

Activity 1module 4

On January 1, of the current year, Oxide sold merchandise to customers using BPI Master Card
totaling P 1,000,000/ On January 6, BPI Master Card remitted in full the amount minus service
charge of 5%.

Jan 1 Account receivable – BPI MASTERCARD 1,000,000

Sales 1,000,000
Jan 6 Cash 950,000 (BPI)
Service fee 50,000
Accounts receivable 1,000,000

TRADE DISCOUNT VS. CASH DISCOUNT 10,000 LESS DISCOUNT 10%, 5% AND 2%
List price 10,000
Less: TD 10% (1,000)
Balance 9,000
Less TD 5% (450)
Balance 8,550
Less TD 2% (171)
Invoice Price 8,379

Cash 8,379
Sales 8,379
List price 12,000
TD 2,000
Invoice price 10,000

January 1. 10,000 less cash discount 5/10, 2/15, n/20 no demand, no delay = mora solvendi
(ako nadelay)& mora accipiende (yung kadeal ko nawaley)

January 1 AR 10,000
Sales 10,000
1/11 cash 4,750
SD 250
AR 5,000
1/16 cash 4,900
Sd
Ar 5,000
1/11 cash 9,500
Sales discount 500
AR 10,000

1/16 10,000
2,000
10,000
1/21 10,000
0
10,000
1/5 CASH 3,000
AR 3,000
1/8 CASH 2,000
AR 2,000
1/21 CASH 5,000
AR 5,000

Sole merchandise worth 100,000, term 5/10, 2/15, n/20

 Goss Method Net method Allowance method

1/1 Ar 100,000 Ar 95,000 Ar 100,000

Sales 100,000 Sales Sales 95,000
95,000 Allow for SD 5,000

Allow. For SD 3,000

AR 3,000 SD Forfeited 3,000
SD forfeited 3,000
Cash 98,000
1/15 Cash 98,000 Allow. For SD 2,000
AR 98,000 Ar 100,000

1/16 Cash 98,000 Cash 98,000

SD 2,000 Cash 98,000 Allow. For SD 5,000
AR 100,000 AR 95,000 Ar 100,000
SD Forfeited 3,000 SD forfeited 3,000

Sales 100,000 Sales 95,000 Sales 95,000

Less; SD 5,000

AR 0
AR 0 AR 0 LESS; ALLOW. FOR SD 0

IF PROBLEM IS SILENT CLOSE METHOD

BABAWIIN YUNG 3K SO MAGIGING 98K SIYA
Balance Sheet
Ar 100,000
Less: allow. for sales discount 5,000
95,000

Goss Method Net method Allowance method

1/1 Ar 100,000 Ar 95,000 Ar 100,000

Sales 100,000 Sales Sales 95,000
95,000 Allow for SD 5,000

Allow. For SD 3,000

1/11 AR 3,000 SD forfeited 3,000
SD forfeited 3,000
 Allow. For SD 2,000
AR 2,000 SD forfeited 2,000
SD forfeited 2,000
Cash 100,000
Cash 100,000 AR 100,000
AR 100,000

1/21 Cash 100,000 Cash 100,000

Sales 100,000 Cash 100,000 Allow. For SD 5,000
AR 95,000 AR 100,000
SD Forfeited 5,000 SD forfeited 5,000

Subsequently (end of the year)

Accounts receivable 100,000

Amortized cost deduct
If the interest is immaterial forget it

Gross Method Net Method

1/2 Accounts Receivable 1,000,000 1/2 Accounts Receivable 980,000
Sales 1,000,000 Sales 980,000
1/4 Accounts Receivable 1,500,000 1/4 Accounts Receivable 1,470,000
Sales 1,500,000 Sales 1470,000
1/6 sales return 200,000 1/6 Sales return (200,000x98%)=196,000
AR 200,000 Ar 196,000
1/10 cash (800,000x98%) 784,000 1/10 cash 784,000
Sale discount 16,000 Ar 784,000
Ar 800,000 2/2 cash 1,500,000
2/2 cash 1,500,000 Ar 1,470,000
Ar 1,500,000 Sd forfeited 30,000
DI NA KASALI KAPAG SINOLE

JOURNAL ENTRY UNDER ALOW. METHOD

ALLOWANCE METHOD
1/2 AR 1,000,000 (gross)
SALES 980,000
ALLOW. FOR SD 20,000 (AR-SALES)

1/4 AR 1,500,000
SALES 1,470,000
ALLOW. FOR SD 30,000 (AR-SALES)

1/6 Sales return 196,000

 Allow. For SD 4,000
AR 200,000 (SALES RET + ALLOW
FOR SD)

1/14 allow for sd 15,000

Forfeited sd 15,000

1/10 Cash 784,000

Allow. For SD 16,000 (allow for sd 1/2 – allow for
sd 1/6)
AR 800,000

1/24 allow for sd 15,000

Forfeited sd 15,000

2/2 cash 1,500,000

AR 1,500,000

NET METHOD
1/2 AR 980,000
Sales 1,000,000

1/4 AR 1,470,000
Sales 1,470,000

1/6 Sales return 196,000

AR 196,000

1/10 Cash 784,000

AR 784,000

1/4 AR 15,000
Forfeited SD 15,000 WE CAN
REMOVED

1/24 AR 15,000
Forfeited SD 15,000

2/2 Cash 1,500,000

AR 1,500,000

OTHER 2/2 Cash 1,500,000

AR 1,470,000
Forfeited SD 30,000
Freight Charge
seller Buyer
FOB Destination AR 100,000 Purchases 100,000
Freight Prepaid SALES 100,000 AP 100,000
Freight out 5,000 NO ENTRY
Cash 50,000
FOB Destination AR 100, 000 PURCHASES 100,000
Freight Collect SALES 100,000 AP 100,000

FREIGHT OUT 5,000 AP 5,000

AR 5,000 CASH 5,000
FOB Shipping Point
Freight Prepaid
FOB Shipping Point
Freight Collect

Summary Table for Freight

Freight Terms Buyer Seller

FOB Freight collect Reduction of A/P Reduction of A/R
Destination Freight prepaid No effect No effect

FOB Freight collect No effect No effect

Shipping Freight prepaid Addition to A/P Addition to A/R
Point

Formula for the computation of net collection or payment:

Invoice price of merchandise sold or purchased XX

Less: Invoice price of merchandise returned (XX)
Net invoice price XX
Less: Sales or Purchase discount (% x Net invoice price above)
(If collection or payment is within the discount period) XX
Net collection or payment before freight XX
Less: Freight paid by buyer – (if the term is FOB Destination, freight collect) (XX)
Add: Freight paid by seller – (if the term is FOB Shipping Point, freight prepaid) XX
Total Net Cash Collection or Payment XX
Note:

Summary Journal Entries – Accounting for Freight

SELLER BUYER
FOB Destination, Freight prepaid
Freight Out xxx No journal entry
Cash xxx
FOB Destination, Freight collect
Freight Out xxx Accounts Payable xxx
Accounts receivable xxx Cash xxx
FOB Shipping Point, Freight collect
No journal entry Freight-In xxx
Cash xxx
FOB Shipping Point, Freight prepaid
Accounts receivable xxx Freight-In xxx
Cash xxx Accounts payable xxx

SUBSEQUENT MEASUREMENT: SHORT TERM RECEIVABLES

Accounts Receivable (face value) 100,000
Less: Allowance for freight charge (5,000)
Allowance for Sales return (5,000)
Allowance for sales discount (1,500)
Allowance for doubtful accounts (XX) (XX)
Net realizable Value XX
Seller Buyer
AR 100,000 PURCHASES 100,000
SALES 100,000 AP 100,000

FREIGHT OUT 5,000 AP 5,000

Allow. for freight charge 5,000 CASH 5,000

2019 2020
SALES 100,000 SALES 0
LESS: SRAsales rent allow. 15,000 LESS: SRA 5,000
Sales discount SD 1,500

AR 100,000
Sales 100,000
SRA 10,000
AR 10,000
SRA 5,000
ASR 5,000

1/1 ASR 5,000

 SRA 5,000
1/15 SRA 6,000
AR 6,000

AR 100,000
SALES 100,000
CASH XXX
SD 3,000
AR XXX
SD 1,500
ASD 1,500

1/1 ASD 1,500

SD 1,500

T- ACCOUNT: ACCOUNTS RECEIVABLE

Accounts receivable
Beginning balance XX XX Ending balance
Sales on account XX XX Sales returns and allowance*
Recoveries XX XX Sales discount
XX Collections including recoveries
XX Accounts written-off

Total =

T- ACCOUNT: ALLOWANCE FOR DOUBTFUL ACCOUNTS

Allowance for doubtful accounts
Accounts written off XX XX Beginning balance
Balance end XX XX Doubtful accounts expense
XX Recoveries

Total =