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    Precious Ruivivar
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    This document defines receivables and accounts receivable. Receivables are financial assets representing a contractual right to receive cash or other assets. Accounts receivable specifically refer to open accounts from sales of goods or services in the ordinary course of business. Accounts receivable are initially measured at fair value plus transaction costs, though for short-term receivables fair value approximates face value. Subsequently, accounts receivable are measured at amortized cost, though this equates to their net realizable value by deducting allowances for items like sales discounts, returns, allowances, and bad debts. Net realizable value represents the estimated amount of cash expected to be collected.

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    Overview of Accounts Receivables. Lecture notes based on Intermediate Accounting 1 of Valix

    Original Title

    RECEIVABLES-OVERVIEW

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    This document defines receivables and accounts receivable. Receivables are financial assets representing a contractual right to receive cash or other assets. Accounts receivable specifically refer to open accounts from sales of goods or services in the ordinary course of business. Accounts receivable are initially measured at fair value plus transaction costs, though for short-term receivables fair value approximates face value. Subsequently, accounts receivable are measured at amortized cost, though this equates to their net realizable value by deducting allowances for items like sales discounts, returns, allowances, and bad debts. Net realizable value represents the estimated amount of cash expected to be collected.

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    3 views2 pages

    Receivables Overview

    Uploaded by

    Precious Ruivivar
    This document defines receivables and accounts receivable. Receivables are financial assets representing a contractual right to receive cash or other assets. Accounts receivable specifically refer to open accounts from sales of goods or services in the ordinary course of business. Accounts receivable are initially measured at fair value plus transaction costs, though for short-term receivables fair value approximates face value. Subsequently, accounts receivable are measured at amortized cost, though this equates to their net realizable value by deducting allowances for items like sales discounts, returns, allowances, and bad debts. Net realizable value represents the estimated amount of cash expected to be collected.

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    © All Rights Reserved
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    of 2

    RECEIVABLES OVERVIEW 8.

    Claims receivable
     If the problem is silent, these accounts are current.
    Definition of Receivables
    9. Loans Receivable
     Financial assets that represent a contractual right to
    Others
    receive cash or another financial asset from another entity
     Financial asset – an asset that will equate or be 1. Credit balance of customer account
    converted to cash  Will turn to a current liability
     Types of receivables
    1. Trade Receivables
    o Refer to claims arising from sale of merchandise CHAPTER 4: ACCOUNTS RECEIVABLE
    or services in the ordinary course of business.
    o Always current Definition of Accounts Receivable
     Part of operating cycle  Open accounts arising from the sale of goods or services
     12 months or less in the ordinary course of business and not supported by
    2. Non-trade receivables promissory notes
    o Represent claims arising from sources other  Accounts receivable generates more revenues through
    than the sale of merchandise or service in the credit terms
    ordinary course of business
    o Can be current or noncurrent
    Accounting for accounts receivable – Measurement
    Trade Receivables
    1. Initial Measurement
    1. Accounts receivables  Fair value + transaction cost (PFRS 9, par. 5.1.1)
     Open accounts arising from the sale of goods or  However, for short term receivable or A/R, fair value is
    services in the ordinary course of business and not equivalent to face value or original invoice amount.
    supported by promissory notes
    2. Notes receivables 2. Subsequent Measurement
     Those supported by formal promises to pay in the form  At amortized cost (PFRS 9, par. 5.2.1)
    of notes  However, for A/R, amortized cost is net realizable
     If the problem is silent, it is automatically a trade value which is the amount of cash expected to be
    receivable/current. However, it can also be a collected or the estimated recoverable amount.
    noncurrent receivable if it is not for the purpose of the
    ordinary course of business.
    Net Realizable Value
    Non-Trade Receivable
     Allowances are deducted from the face value in order to
    1. Advances to or receivable from shareholders. Directors, determine the amount of cash expected to be collected.
    officers, and employees. o Allowances for:
     If the problem is silent, these accounts are noncurrent. 1. Sales discount 3. Freight
    2. Advances to affiliates 2. Sales returns and allowances 4. Bad Debts
     If the problem is silent, these accounts are noncurrent.  Sales Discount
    3. Advances to supplier o Two types:
     If the problem is silent, these accounts are current. 1. Trade
    4. Subscription receivable - not recorded/included in allowances to net
     If the problem is silent, these accounts are noncurrent. realizable value; tawad; not written in the sales
     Presentation is a deduction to equity if noncurrent invoice
    5. Creditor’s account with debit balances 2. Cash
     If the problem is silent, these accounts are current. - recorded/included for computation of net
    6. Special deposits on contract bid realizable value; encourages early payments for
     If the problem is silent, these accounts are noncurrent. receivables
    7. Accrued Income - terms usually look like n/30 wherein n =
     Income that is not part of the operating cycle percentage of discount and the denominator
     If the problem is silent, these accounts are current. represents the discount period.
     Sales Returns and Allowances
    o An allowance to receivable because it no longer
    collectible.
    o Sales returns mean that there is a physical
    transfer/return of damaged merchandise to seller.
    o Sales allowances mean that there is a reduction to
    price because of damaged merchandise.

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