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– a statement which brings into agreement the cash

FINANCIAL ACCOUNTING balance per book and cash balance per bank.
AND REPORTING 1 Bank statement is a monthly report of the bank to
Cash and Cash Equivalents, Bank Reconciliation, the depositor showing: (a) cash balance per bank,
Receivables, and Receivable Financing
beginning; (b) deposits (c) checks drawn by
Overview of the Handouts: depositor and paid by the bank; (d) daily cash
1. Cash and Cash Equivalents balance per bank
2. Bank Reconciliation
Bank Reconciliation
3. Accounts Receivable Balance per book:
4. Notes Receivable Unadjusted balance per book xxx
5. Loan Receivables Add: Collected Note Receivable xxx
Less: NSF xxx
6. Receivable Financing Service Charge xxx (xxx)
Add/Less: Errors xxx
Adjusted balance per book xxx
1 CASH AND CASH EQUIVALENTS
1.1 Cash Balance per bank:
– not just currency and coins but also those that are Unadjusted balance per bank xxx
Add: Deposit in Transit xxx
acceptable by bank for deposit or immediate
Less: Outstanding Checks (xxx)
encashment such as checks, bank drafts and Add/Less: Errors xxx
money orders. Adjusted balance per bank xxx
– measured at face value
– if in foreign currency, measured at current
exchange rate 3 ACCOUNTS RECEIVABLE
– any excess should be invested in revenue-earning
– are financial assets that represent a contractual
investment right to receive cash or another financial asset from
– deposits in foreign investment which are another entity.
subject to foreign exchange restriction, if material, – is an open account not supported by a promissory
should be classified separately among noncurrent note
assets and the restriction clearly indicated.
3.1 Trade Vs. Nontrade Receivables
Cash items: Trade: arising from ordinary course of business
⮚ Cash on hand – undeposited cash Non Trade: arising from sources other than from
⮚ Cash in bank – cash deposited in banks ordinary course of business
⮚ Cash fund – cash set aside for current
Customers’ Credit Balances: results from
purposes such as petty cash fund, payroll overpayment, returns and allowances, and advance
fund, etc. payments from customers. These are treated as
current liabilities.
Petty Cash Fund – money set aside to pay small
expenses 3.2 Measurement
– two methods of handling: Initial: Fair value plus transaction costs that are
a. Imprest fund system directly attributable to the acquisition.
b. Fluctuating fund system Subsequent: Net realizable value or estimated
recoverable amount
1.2 Cash Equivalent
- includes treasury bills, money market, and time 3.3 Net Realizable Value
deposit with maturity of three months or less from Deductibles:
a. Allowance for freight charge
the date of purchase
1 FOB Shipping Freight Obligation by
Classification of T-bills, Money Market and Time Point Prepaid buyer, but paid by
Deposit: seller
⮚ Cash equivalent – if maturity is three months
2 FOB Freight Obligation by
or less from the date of acquisition; if the
Destination Collect seller, but paid by
problem is silent buyer
⮚ Current Asset (Separate line item) – if maturity
is more than three months but not exceeding 3 FOB Freight Obligation by seller
a year Destination Prepaid and paid by seller
⮚ Non-current asset – if maturity is more than 4 FOB Shipping Freight Obligation by
one year Point Collect buyer and paid by
buyer
2 BANK RECONCILIATION

Financial Accounting and Reporting I Handout #2 - Cash and Cash Equivalents, Bank
Reconciliation, Receivables, and Receivable Financing
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To record sale:
Allowance for doubtful
Accounts Receivable accounts xxx
xxx Accounts
Freight out Receivable
xxx xxx
Sales
xxx
Allowance for
freight charge
xxx
Note: Direct written off method is prohibited under
IFRS because it violates the matching principle

3.4 Methods of Estimating Doubtful Accounts:

To record collection within discount period: a. Aging of accounts receivable
Cash b. Percent of accounts receivable
xxx c. Percent of sales
Sales
xxx 4 NOTES RECEIVABLE
Allowance for freight – are claims supported by formal promises to pay
charge xxx usually in the form of notes
Accounts – represents only claims arising from sale of
receivable xxx merchandise or service arising from the ordinary
course of business

4.1 Measurement
b. Allowance for sales return Initial: present value, except for short-term notes
receivable which should be measured at face value
Sales return
xxx Subsequent: measured at amortized cost
Allowance for sales
return xxx Face Value of Note
Less: Present Value of Note
xxx
Unearned Interest Income
xxx

Present Value of Note

Cash received
c. Allowance for sales discount xxx
Sales Discount Sales Price
xxx
Allowance for sales 5 LOAN RECEIVABLE
discount xxx – financial asset arising from a loan granted by a
bank or other financial institution to a borrower or
client

5.1 Measurement
Initial: at fair value plus transaction cost that are
directly attributable to the acquisition of financial
asset
d. Allowance for doubtful accounts Subsequent: measured at amortized cost
Allowance Method *Initial amount recognized < principal amount =
Doubtful Accounts difference is added to carrying amount
Expense
xxx *initial amount recognized > principal amount =
Allowance for difference is deducted from the carrying amount.
doubtful accounts xxx
5.2 Origination Fees
-recognized as unearned interest income and
amortized over the term of the loan.

Direct Origination Costs

- deferred and amortized over loan term
Direct Write-off Method

Financial Accounting and Reporting I Handout #2 - Cash and Cash Equivalents, Bank
Reconciliation, Receivables, and Receivable Financing
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Principal Amount
xxx Source: Intermediate Accounting Vol. 1 2020 edition by
Add: Origination fees Conrado T. Valix, Jose F. Peralta, Christian Aris M. Valix
xxx
Less: Direct origination
costs xxx
Initial Carrying Amount of
Loan xxx

5.3 Impairment of Loan

– an entity shall recognize a loss allowance for
expected credit losses on financial assets
measured at amortized cost
– credit losses are the present value of all cash
shortfalls
Credit risk – the risk that one party will cause a
financial loss for the other party by failing to
discharge an obligation
Carrying Amount of Loan
xxx
Present Value of cash
flows xxx
Impairment Loss
xxx

Loan Receivable - this

year xxx
Allowance for loan

6 RECEIVABLE FINANCING
– the financial flexibility or capability of an entity to
raise money out of its receivables

Forms of Receivable Financing:

a. Pledge of Accounts Receivable – accounts
receivables are pledged as collateral security for
the payment of the loan
b. Assignment of Accounts Receivable – the
assignor (borrower) transfers rights to some of
the rights in AR to a lender called the assignee
in consideration for a loan; evidenced by a
financing agreement and a promissory note
both of which the assignor assigns.
c. Factoring of Accounts Receivable - factoring
is a sale of AR on a without recourse, notification
basis; factor assumes responsibility for
uncollectible factored accounts. In assignment,
assignor retains ownership of the accounts
assigned.
i. Casual Factoring - normal sale of accounts
receivable, without other deductions
ii. Factoring as a continuing Agreement –
finance entity purchases all of the accounts
receivable of a certain entity
d. Discounting of Notes Receivable –to discount
the note the payee must endorse it; It may be
with
i. With recourse – the payee must pay the
bank if the maker (one liable) dishonors the
note
ii. Without recourse – the payee avoids future
liability even if the maker refuses to pay the
bank on the date of maturity

Financial Accounting and Reporting I Handout #2 - Cash and Cash Equivalents, Bank
Reconciliation, Receivables, and Receivable Financing