CREDIT AND COLLECTION

CREDIT FUNDAMENTALS

Meaning of Credit

- An arrangement to receive cash, goods or services now and pay for them later.
- ARRANGEMENT means there is an agreement and transaction within two parties or two
persons.
- 1 party will receive cash, goods or services then the other party will lend cash, goods or services.
- In credit wala munang lalabas na resources like MONEY OR CASH

Meaning of Credit in a business, credit is viewed differently.

Viewpoint of Lender- connotes trust on the borrower’s capacity and willingness to pay

- it means kaya nagpapautang ang lender kasi alam nyang makakabyad ang borrower in the
future.

Viewpoint of Borrower- it is the ability to obtain goods or services in exchange for a promise to pay.

- There should be a PROMISE to called it a CREDIT kasi pag hindi, maaari itong tawagin na gift or
donation

More appropriate definition of Credit

Credit

- A transaction involving the transfer of goods, services, funds, property or rights, thereby
creating an obligation on the part of those who receive them, that must be complied in the
future.

It indicates an exchange definition between 2 parties:

- (CREDITOR/ nagpautang) The first party provides the goods, services, funds, property or a right.
- (DEBTOR/ umutang) The second party has the obligation by promising to pay for them in cash,
in kind or return the thing borrowed.

5 ITEMS PROVIDED BY THE LENDER OR CREDITOR ARE:

1. Goods

2. Services

3. Funds

4. Property

5. Rights
INTRODUCTION TO INCOME TAXATION

The concept of Income

1. Why is income subject to tax?

- Because income is the best measure of taxpayers’ ability to pay tax.
- Meaning, malalaman natin ang abilidad ng isang taxpayer magbayad ng tax base on his or her
income

ABILITY TO PAY THEORY- States that the taxpayers should be required to contribute based on their
relative capacity to sacrifice for the support of the government

Those who have should be tax more kahit kakaunti yung narereceive nilang benefits sa government

Those who have less should contribute less even they receive more benefits from the government.

2. What is income for income taxation?

- Under the NIRC or National Internal Revenue Code, the tax concept of income is referred to as
“gross income”
- A taxable item of income is referred to as an “item of gross income” or “inclusion in gross
income”

For example ang isang item of income natin ay hindi pinapatawan ng tax o non taxable ang tawag dun is
income exempt from tax or exempt from income tax or exclusion from gross income

Gross income- is any inflow of wealth to the taxpayer form whatever source, legal of illegal, that
increases net worth

- Meaning lahat ng income ng taxpayer saan man siya galing from legal man o illegal na nakakpag
increase ng kanyang net worth ay tinatawag na gross income

GROSS INCOME

1. Income from employment, trade, business or exercise of profession

2. Income from properties and other sources such as dealings in properties and other regular or
casual transactions

TAXABLE INCOME

Under the NIRC, refers to certain items of gross income less deductions and personal exemptions
allowable by law.

LESS means minus

There are no longer personal exemptions under the TRAIN law.

Gross Income – Deductions = Taxable Income

ELEMENTS OF GROSS INCOME

1. It is a return on capital that increases net worth.

2. It is a realized benefit.
- Realized means earned benefit
3. It is not exempted by law, contract or treaty.
- Pag sinabing exempted by law, contract or treaty that means hindi na siya taxable

RETURN ON CAPITAL

Capital means wealth or any property of taxpayer

Return on capital- is an income subject to income tax meaning its TAXABLE

Return of capital- hindi niya pinapataas yung net worth ng taxpayer

-Does not increase net worth

-Not TAXABLE

CAPITAL ITEMS DEEMED WITH INFINITE VALUE

There are capital items that have infinite value and are incapable of pecuniary valuation

-means merong mga items na hindi na memeasure ng pera or cannot be measured financially

Example:

Value of life, health and human reputation wala yang katumbas na halaga

Any compensation for their loss is a return of capital

-return of capital that means exempt or not taxable. Pag sinabing compensation kabayaran, so anything
na marereceive mo as kabayaran for the loss of life, health and human reputation is a return of capital
exempted from income tax or not taxable.

The value of life cannot be measured by money this is applicable sa life insurance company

Under Section 32 of NIRC, the proceeds of life insurance policies paid to the heirs or beneficiaries upon
death of the insured, whether in a single sum or otherwise, are exempt from income tax.

The proceeds of a life insurance contract collected by an employer as a beneficiary from the life
insurance of an officer or any person directly interested with his trade are likewise exempt.

_-meaning to say kahit yung beneficiary mo ay yung employer mo, yung proceeds na matatanggap
under a life insurance policy ay still exempt from income tax, meaning to say walang ipapataw na tax
doon.
As a general rule, the proceeds of life insurance contract or life insurance policy are exempt from
income tax. Pero meron tayonmg exemption to the rule, meaning to say the following are taxable return
on capital they are not exempt.

1. It means when the insured outlives the policy

INVESTMENT AND PORTFOLIO MANAGEMENT

Investment Setting

Meaning of Investment

- Is putting money into something with the expectation of profit.

- Putting money means that your committing funds into something in order for you to get a
return. Return is called profit or income
- Kaya ka mag iinvest kasi gusto mo kumita at magkaroon ng profit o income

INVESTMENT OBJECTIVES

Categorized into two namely:

1. Basic Investment Objectives

2. Secondary Investment Objectives

Basic Investment Objectives

Any investment decision will be influence by three objectives:

1. Security
2. Liquidity
3. Yield
A best investment decision will be one which has the best possible compromise among these three
objectives.

Security

- Central to any investment objective, we have to basically ensure the safety of the principal
- Meaning it is the safety of our investment
- Dapat secured ang ating investment
- An investor can afford to lose the return at any given point of time but he cannot afford to
lose the principal itself.
- Kung nag invest ka ng 100 thousand pesos dapat at any given point of time dapat meron ka
padding 100 thousand pesos kahit wala ka ng return. Pero as much as possible because you are
committing your funds to something dapat hindi mawawala ang principal amount.
- By identifying the importance of security, we will be able to identify and select the instrument
that meets this criterion.
MONETARY POLICY AND CENTRAL BANKING 

Economic Prosperity and Welfare

Full Employment and

Stability of currency

These are the essential goals of most Central Banks around the world, and it can be achieved through
the use of monetary policy.

1.1 Overview of Monetary Policy

Chairperson of the U.S Federal Reserve Board, is considered to have the most immediate economic
power in the world.

A market crash is a sudden dramatic decline of prices, resulting in a significant loss of wealth.

Monetary policy is the central bank’s use of changes in interest rates, the money supply and the
exchange rate in order to influence the level of aggregate demand within an economy.

Interest rate- is the cost of borrowing and reward for saving.

LOWER INTEREST RATES

 Encourage consumption and investment because the cost of borrowing is lower.