DISCUSSION MATERIALS FOR BANK RECONCILIATION

ALACC0007/ INTERMEDIATE ACCOUNTING 1

BSA AA11/AA12
TERM 3 AY 2022-2023

ABNORMAL BALANCES
A. ABC Co. has an outstanding receivable of P10,000 from Customer A. Subsequently, Customer A
remits P16,000 to ABC Co. representing payment for the existing receivable and the excess as advance
payment for the future delivery of goods.

B. ABC Co. has an outstanding payable of P12,000 to Supplier B. Subsequently, ABC Co. pays P17,000
Supplier B representing settlement of the existing payable and the excess as advance payment for the
future purchase of goods.

IDENTIFICATION
Accounts receivable - net of P10,000credit balance P50,000

Notes receivable (trade) 5,000

Notes receivable (non-trade)- P5,000 due in one ycar 25,000

Dividends receivable 1,000

Subscriptions receivable 2,000

Advances to o cers and employees- due in 18 months 4,000

Accounts payable- net of P6,000debit balance 3,000

ACCOUNTING FOR THE TERMS OF SALE CONTRACT

On December 27, 20x1, ABC Co. received a sale order for a credit sale of goods with selling price of
P1,000. ABC Co. shipped the goods on December 31, 20×1. The buyer received the goods on January ,2
20×2. The related shipping costs amounted to P10. ABC Co. collected the receivable on January 5, 20×2.

FOB shipping point/ FOB destination

Freight collect or freight prepaid

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 DISCOUNT: GROSS AND NET METHOD (FORMER GAAP)

An entity sells inventory with a list price of P10,000 on account under credit terms of20%, 10%, 2/10, n/
30.

DISCOUNT: PFRS 15
An entity sells inventory with a list price of P10.000 on account under credit terms of 20%, 10%, 2/10, n/
30. The entity estimates that only 80% of the cash discount will be taken and concludes that it is highly
probable that a significant reversal in the cumulative amount of revenue recognized will not occur as the
uncertainty is resolved.

What if the entity uses the 'Sales discount' account?

SUBSEQUENT MEASUREMENT
An entity sells inventory with a list price of P10,000 on account under credit terms of 20%, 10%, 2/10, n/
30. The entity estimates that o n l y 80% of the cash discount will be taken and concludes that it is highly
probable that a significant reversal in the cumulative amount of revenue recognized will not occur as the
uncertainty is resolved.

ALLOWANCE FOR DOUBTFUL ACCOUNTS: ALLOWANCE AND DIRECT METHOD

• Accounts receivable of P10,000 is found to be doubtful of collection.
• The P10,000 doubtful account is deemed worthless.
• The P10,000 account previously written off is subsequently recovered.

ALLOWANCE FOR DOUBTFUL ACCOUNTS: PERCENTAGE OF CREDIT SALES

ALLOWANCE FOR DOUBTFUL ACCOUNTS: PERCENTAGE OF RECEIVABLES

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COMPUTATION OF PERCENTAGE

ABC Co. has been recognizing bad debt expenses based on the direct write-off method. In20x4, ABC
Co.decided to change to the allowance method that doubtful accounts shall be estimated using the
percentage of receivables method. The percentage is to be computed based on al available historical data
up to a maximum of four years. Information for four years is shown below:

The balances of accounts receivables on January 1, 20x4 and December 31, 20×4 are P100,000 and
P200,000, respectively.

Compute for the doubtful accounts expense to be recognized in 20x4.

** End of module **

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