Professional Documents
Culture Documents
2 Clasiffications
Trade: claims arising from sale of goods and services in the normal course of
business
Ex: Accounts Receivable AR & Notes Receivable NR
Non-Trade: claims arising from sources other than from sale of goods or
services in the normal course of business
Ex: Advances to officers and employees, advances to affiliates, advances to
suppliers, subscription receivables (can appear in the Balance sheet Asset)
and also in Equity) , creditors account with debit balances, deposits, accrued
income & claims
RECEIVABLES 1
PRESENTATION
The details or the breakdown shall be disclosed in the "notes to the financial
statements
should be classified as CURRENT LIABILITIES and are not offset against the
debit balances in other customers' accounts, EXCEPT when the same is
immaterial
Illustration:
RECEIVABLES 2
a. Compute the correct amount of accounts receivables
RECEIVABLES 3
Initial Measurement
Fair value is usually the transaction price. For short term receivables, this is
equal to the face amount or original invoice amount
Subsequent Measurement
For short term receivables, amortized cost is usually the net realizable value
Required:
Compute for the net realizable value of accounts receivable at year end
RECEIVABLES 4
Accounting for Freight
Who initially paid? The one who recorded the cash outflow)
Illustration:
An entity sold P10,000 merchandise on account. Cost of shipping is P150
RECEIVABLES 5
Discount
2 Kinds of Discount
Illustration:
Assume that on July 16, 2020, ABC Manufacturing sells merchandise on account
with a list of price of P100,000, less trade discounts of 10%, 10%, and 5%. The
invoice price of the merchandise is computed as follows:
2/10, n/30 2% discounts is granted if account is paid within 10 days from
invoice date, due in 30 days)
RECEIVABLES 6
Recording depends on any of the following method: Gross Price method; Net
Price method; and Allowance method
Under this method, both AR and Sales are initially taken recorded at Gross
Sales with no recognition of the available discount until it is actually taken
Illustration:
Assume sale of merchandise for P100,000, terms 5/10, n/30. The entry to record
the transaction is:
Under this method, both the AR and Sales are initially recorded at sales price
less the cash discounts
Illustration:
RECEIVABLES 7
Assume sale of merchandise for P100,000, terms 5/10, n/30. The entry to record
the transaction is:
Allowance Method
Illustration:
Assume sale of merchandise for P100,000, terms 5/10, n/30. The entry to record
the transaction is:
RECEIVABLES 8
Assume collection is made beyond the discount period:
Illustration:
DEC 9 - Sold merchandise to BSA Company under credit terms of 2/10, n/30.
The list price is P120,000, less 10%, less 5%
RECEIVABLES 9
Net Method
RECEIVABLES 10
Allowance Method
RECEIVABLES 11
Credit Card Sales
The credit card company will now be the one liable to pay the seller and
absorbs the risk of non-payment by th buyer
As compensation, the credit card company charges the buyer credit card fees,
normally ranging from 1% to 5%
Illustration:
A customer used Visa credit card to pay for P25,000 worth of merchandise. The
entry to record the sale is:
RECEIVABLES 12
Subsequently, Visa remitted the sales reduced by the credit card fee of 2%
(assumed rate). The entry to record the transaction is:
RECEIVABLES 13