CHAPTER 8: RECEIVABLE FINANCING
statements. (kasi ikaw pa rin ang may responsbility
FINANCING
 Nagpprovide sa iyo ng cash or inflows of cash kasi
ginagamit mo siya in the normal operation of
business or in some other purpose.
RECEIVABLE FINANCING
(nangyayari kapag yung company ay nangangailangaN
ng pera. Ngayon ang problema, receivable ito. Itong
receivable na to ay babayaran ng customer mo sa
binigay mo na credit period. For example 30 days. 30
days mo pa makukuha yung receivable.
or
ginagawa ang receivable financing kapag napupunta
ang isang company sa hindi magandang cash flow
position. So nangangailangan talaga siya ng cash. Sa
pamamagitan ng receivables, hindi iccollect. Kundi
merong gagawin para maka obtain siya ng cash from
the bank/FI. Hindi collection ang gagawin. Bali yung
company will be raising funds out of receivable).
Used your receivable as a collateral para magkaroon ng
cash na kailangan mo in the normal operation of
business. Pwedeng gawing collateral ang a/r kasi mas
mabilis iconvert into cash.)
 Is the financial flexibility or capability of an entity to
raise money out of its receivables.
FORMS OF RECEIVABLE FINANCING (ano yung ibat
ibang way para makapag raise ng money out of this
receivable. Na hindi ang pinag uusapan ay nakolekta
mo ang receivable. Kundi ginamit mo siya para maka
obtain ng cash)
1. PLEDGE OF ACCOUNTS RECEIVABLE
 The accounts receivable may be pledged as
collateral security for the payment of the loan.
 Accounts receivable as a collateral for loan from
banks or other financial institutions. (pwede din
palang gawing collateral ang a/r)
 The borrower makes the collection of the pledged
a/r and turnover to the bank. (For example:
nangutang ka kay bank. Iccollateral mo si a/r. since
ikaw pa rin ang may ari ng receivables na yan. Yung
mga maccollect mo ay irremit mo kay bank or kay
financial institutions).
 loan is recorded by debiting cash and discount on
note payable and crediting cash.
 Subsequent payment of the loan is recorded by
debiting note payable and crediting cash.
 No journal entry but should be disclosed to financial
to collect).
 Pledged a/r is general and not specific (all a/r are
pledged). (ibig sabihin, di mo ina i-iidentify sinong
mga customer mo lang don na may utang sa iyo
ang ippledged mo. Ito hindi, lahat ng may utang sa
iyo, lahat ng collectible mo ay naka pledged as a
collateral na inobtain mo sa bank or other financial
institutions).
2. ASSIGNMENT OF ACCOUNTS RECEIVABLE (meron ka
lang na mga customer or mga a/r na I aassign or
iccollateral sa bank and hindi lahat. And normally
sa totoong buhay, pinipili. Kailangan highly
collectible na a/r ang iaassign mo sa bank.)
 A borrower called the asignor transfers rights in
some accounts receivable to a lender called the
assignee in consideration for a loan.
 A more formal type of pledging of accounts
receivable.
 Is secured borrowing evidenced by a financial
agreement and a promissory note both of which the
assignor assigns. (Secured borrowing- kasi diba
nangutang, syempre kung may nakasanla, secured
tawag don. Kung walang nakasanla, unsecured
tawag don)(formal siya because it is evidenced by a
financial agreement between bank or other
financial institutions and borrower. Dahil may
agreement may mga parties to the contract:
o Assignor (borrower or business)
 Nag aassign ng mga receivables na
iccollateral niya sa bank.
 Transfer rights in some a/r to the
lender or assignee. Only specific a/r
are assigned and NOT ALL A/R
unlike pledging.
o Assignee (lender)
 Sa kanya naka assign yung mga
cinollateral.
 May be done either:
a. Notification basis - customers are notified to
pay directly to the assignee. (iniinform mo si
customer na inassign mo, na yung kkoollektahin
mo sa kanya sa bank na umutang ka. So
iniinform mo yung customer mo. Nnotify mo si
customer na directly na magbayad sa bank or
financial insititutions. Kasi inassign ko yung
receivable mo sa bank. Instead na sa akin ka pa
magbabayad, ideretso mo na).
Remit the collection to the bank or financial
institution (Assignee).
 b. Nonnotification basis – customers are not
informed that their a/r were assigned. (hindi
mo na ninotify yung mga customer mo or
ininform yung customer mo. Therefore, sa iyo
pa rin nagbabayad si customer and not directly
sa bank).
Pays to the entity (Assignor).
 The bank or the assignee only lends money to
assignor of a certain % and not the whole amount.
(for ex, 1M ang uutangin mo. Not 1M ang bibigay
sa iyo ng bank. May certain percentage lang. ang
tanong 50% ba 60% and so on. Basta hindi 100%)
 % depends on the quality of A/R/ (the higher the
quality, the higher the amount).
 Normally with service/finance charge/ interest
charge/ commission fto assignor. (syempre
ipprocess pa loan sa iyo nd may collateral. Bukod sa
interest na pagpapautang, ay may additional
charges pa wherein yan yung kita ng bank.)
 Journal entry: page 236
A/R assigned xxx
A/R xxx
Hihiwalay lang yung assigned sa hindi assigned.
Yung matira, yun yung mga unassigned reecivable
or general receivable mo. Kaya nagccredit ng a/r.
 PRESENTATION IN THE SFP:
A/R – Unassigned XXX
A/R – Assigned XXX
Less: Any Allowance for Doubtful Account XXX
NET REALIZABLE VALUE XXX
 NOTIFICATION BASIS : EQUITY IN ASSIGNED
ACCOUNTS
The entity shall disclose its equity in the assigned
a/r. (nirrequire ng standards na idisclose mo yung
equity portion or residual interest doon sa inassign
mong a/r. for example, ang ginrant lang ng bank ay
400k. pero yung a/r na inassign mo ang total niya
ay 1M. so kung may claim man sa iyo si bank.
Hanggang 400k lang. kung ano yung matira yun
yung equity in assigned a/r. sa madaling salita, may
karapatan ka, residual interest mo yan. Sa iyo yan.
The entity shall disclose in the notes to fs the equity
or residual interest in the assigned a/r. kasi di lahat
yon ay mapupunta kay assignee. Meron dong
portion na sa iyo pa rin kahit na inassign mo yung
rights sa assignee to collect from the receivable.)
A/R – Assigned P1,000,000
Note payable-bank (400,000)
EQUITY IN ASSIGNED A/R 600,000
3. FACTORING OF ACCOUNTS RECEIVABLE (hindi mo
na siya sinasanla bagkus ibinebenta mo. Kapag
binenta mo siya. Itinatransfer mo lahat ng risk and
rewards doon sa a/r or asset na yon. Yung rewards
is yung mabbenefit mo doon sa tinransfer sa iyong
asset katulad ng receivable. Like collection. Diba
mabbenefit mo yon. Edi sa iyo na yon. Na itransfer
na sa iyo yung karapatan. Ngayon kung hindi siya
makabayad, yun yung risk. Pati risk natransfer sa
iyo. Therefore, if there is a transfer of risk and
rewards, hindi collateral ang nangyayari. Ang
nangyayari there is a sale of a/r. at yun yung
concept of factoring of a/r. )
 Factoring is a sale of accounts receivable usually on
a without recourse, notification basis. (sale siya and
not pledging. Sale because there is a transfer of
ownership. For ex. Ako si bank, ikaw si business,
finactor mo na sa aking yung a/r. kung nasa akin na
yung risk and rewards. Nasa akin na yung
karapatan. Nasa akin na yung transfer of
ownership. Nasa akin na yung burden ng:
1. Kokolektahin ko yung a/r na yon. Ako ang
magffollow up.
2. Ako ang magmmaintain ng record. Kasi nga
binili ko na. ako na ang may ari.
Notification basis- ninonotify mo or iniinform
mo kung sino man yung a/r na ibinenta mo or
finafactor mo. Syemre kailangan malaman yan
ng kung sino man yung a/r or customer na yon
na siya ay nabenta na. at directly na siyang
magbabayad doon sa bank.
Without recourse- halimbawa, nabenta mo na
si a/r. halimbawa, ako si bank. Ako ang bumili.
Kapag hindi nagbayad si customer. Hindi na
kita hahabulin. Kaya nga without recourse eh.
Wala ka ng utang sa akin. Burden ko na yon.
Kaya nga naitransfer mo sakin yung risk and
rewards eh. So kung hindi siya magbayad. Alam
ko yon from the very beginning. Kaya ko nga
binibili yung a/r. kaya mo nga finactor sa akin.
Alam ko yung may risk na ganon na hindi ako
maka collect kung kanino mang customer yung
ibinenta mo sa akin. So wala kang liability. Kaya
ang tawag ay without recourse.
With recourse- halimbawa, yung customer na
binenta mo sa akin ay hindi nagbayad.
Hahabulin kita, ikaw yung hahabulin ko. May
liabilitiy ka pa rin sa akin.
 Involves two parties:
a. Business entity (who sells a/r to bank)
b. Factor (Bank/Financial institution)
 And since this is a SALE. It is the FACTOR who has
the responsibility of:
a. Keeping the A/R records (siya na magkkeep ng
record)
b. Collecting the A/R (nasa kanya na yung burden.
Siya na yung magffollow up and so on).
 There is a recognition of either GAIN or LOSS on
factoring:
Proceeds received Pxxx
(magkano yung tinanggap mo/magkano binenta)
Less: Net Carrying Ammount of A/R (xxx)
Gain/Loss on Factoring Pxxx
*pag mas maliit yung tinanggap mo kesa sa value ng a/r
na binebenta mo. Lugi ka. (LOSS)
*pag mas malaki yung tinanggap mo kesa sa binebenta
mo. Ikaw ang kikita. (GAIN)
(Dahil bentahan yan. Pwedeng may malugi. Pwedeng
may kumita. Hindi katulad ng pleding or assignment.
Hindi mo naman totally tinatransfer yung right. Pero
cinocollateral mo lang. eto binebenta mo. So kapag
may bentahan, ofc may malulugi or may kikita. Either
gain or loss on factoring.)
 2 FORMS OF ACCOUNTS RECEIVABLE FACTORING
(2 ways para mabenta)
1. Casual Factoring – in a critical cash position, it may
be forced to factor some or all of it’s a/r at a
substantial discount to bank or any financial
institution to obtain cash. (napilitan ka lang
talagang magbenta ng a/r dahil kailangang
kailangan mo ng pera. Nagkakaroon ka ng
liquidating issue. Mayroon kang kailangang
bayaran and so on. Bali na force ka na ibenta
yung a/r mo. Casual lang, hindi naman intention
mo. No choice ka na ibenta mo kasi need mo.
Lalabas talaga na ikaw ay loss on factoring. Dahil
kailangang kailangan mo ng pera. Ibinenta mo si
a/r. ikaw no choice ka kahit bilhin ng bank/FI yan
ng mas mura. Dahil kailangan na kailangan mo ng
pera. Tatanggapin mo. Kesa sa wala.
SUBSTANTIAL DISCOUNT- napakalaki ng ibinawas
mo or idiniscount mo compare sa net carrying
amount niya. Kumbaga binenta mo talaga siya ng
mas mura. Kasi kailangan na kailangan.)
2. Factoring as a continuing agreement- a finance
entity purchases all of the a/r of certain entity.
(there is a continuous agreement with the bank/FI
to purchase all of a/r. kumbaga hindi siya one
time sale. Hindi siya katulad ng casual factoring.
Ito continuous or may continuity. Kaya may
continuation agreement.
At dahil regular or may continuing agreement na
gagawin. Medyo mahigpit ang gagawin ni factor
sa iyo. Kasi regular. Hindi katulad ni casual
factoring, talagang kung one time yan. Ang
ibebenta nyan ay yung receivable na hindi mataas
yung risk na magdefault.)
 Before the selling entity shipped to customer, the
entity requests the FACTOR’S CREDIT APPROVAL.
Once approved by the factor, a/r is sold
immediately to the factor after the shipment of the
goods to the customer.
 The factor then assumes the: credit function and
collection function. (yung bank na yung mag
aassume nung credit function. Means kung may
mga subsequent pa na utang. Si bank na bahala.
Nasa kanya na rin yung collection function. Means
nasa bank na yung burden na magcollect nung
kung magkano man yung value nung pinautang).
 For compensation, typically the factor charges a
commission or factoring fee of 5% to 20% for its
services of credit approval, billing, collecting, and
assuming uncollectible factored accounts. (syempre
hindi papayag si bank na hindi niya pagkakakitaan
yung mga pinaggagagawa niyang yan. Bank kasi
yan. Pera ang business niyan. Kaya nga, nagccharge
ng commission si factor sa iyo or sa business mo or
yung tinatawag na factoring fee. How much? Nasa
5% to 20% for the processing fee, siya yung mag
ccredit function, and collection function. Kikita siya
sa portion na yon. Sa part mo, kikita si bank ng
pera.)
 Factor’s holdback means the factor may withhold a
predetermined amount as a protection against
customer returns and allowances and other special
adjustments. (si bank ay nagwithhold of a
predetermined amount. Ibig sabihin napag usapan
niyo na bago kayo pumasok ng arrangement. As a
protection against a customer na pwedeng
amgbalik ng paninda or magkaron ng allowance or
any special adjustments. Kasi di naman talaga
maiiwasan na may return of inventory, mag karon
ng defect or any form of adjustment. Kaya may
factor’s holdback, ibinabawas na, withholding an
amount of predetermined amount. So kung walang
returns/allowances/any special adjustments,
 ibabalik ko yon sa iyo. Kung ako yung bank. Ibabalik
ko rin sa iyo yung pera.)
(ibig sabihin, may hinold siya. Mayrong security.
Kumbaga yung concept nito ay for ex. kung may
tinadahan at bumili ka softdrinks. Wala siyang
assurance kung ibabalik mo yung bote or hindi. Ang
nangyayari nagdedeposit ka. Parang secuirty
deposit. Para pag hindi niya binalik at least
compensated yung bote nung ibinayad niya. Ganon
din yung concept ng factor’s holdback.)

TREATMENT: receivable from factor (current asset)

(kasi pera yon eh. Yung predetermined amount na
nakay factor. Sa iyo, receivable mo yon).

So kailan ibabalik ni bank/FI yung winithhold na

predetermined amount? Final settlement is made
after the factored a/r have been fully collected.
(kapag daw si bank/FI nacollect na niya yung
binenta mong a/r sa kanya. Yun yung time na
ibabalik na niya sa iyo yung factor’s holdback or
yung receivable mo from the factor. Aksi syempre
nacollect na. wala ng magkakaron ng return. So
ikaw yung business, ibabalik ko na yung pera sa
iyo).

REVIEW!
o Pledging of a/r - ang nangyayari ay cinocollateral
mo pero lahat ng a/r. general. Ikaw pa rin ang
magccollect ng receivable kahit na nakacollateral
yon. Hindi mo siya kailangan gawan ng journal entry
pero kailangan mo siyang idisclose sa notes to fs. At
simple lang ang treatment.
o Assignment of a/r- mas formal kesa ledging.
Secured borrowing and also may journal entry
talagang corresponding don. Kung saan ihinihiwalay
mo yung assigned a/r don sa mga unassigned a/r or
general a/r mo. Sa amdaling salita, pinipili mo lang
kung anong a/r ang I aassign mo at hindi lahat.
o Factoring of a/r- sale of a/r. totally na tinatransfer
mo na talaga yung rights and risk and rewards and
ownership doon sa factor. Or doon sa bank or FI.
May 2 forms: casual and with continuing
agreement.