Professional Documents
Culture Documents
NATURE
Notes recievable are claims supporter by formal promise to pay usually in a form of notes.
• A Promissory note is a written contract in which one person known as the maker, promises to pay
another person known as the payee a diffinite sum of money
• Standing alone, the term "notes recievable" represents only claims arising from sale of merchandise,
or service in ordinary course of business. Thus, notes recievable from officers, employees,shareholders
and affiliates shall be designated separately.
DISHONORED NOTES
• When a promissory notes mature and is not paid, it is said to be dishonored. Theoritically, dishonored
notes are transferred to Accounts recievable.
• The amount debited to Account recievable should include the face amount, interest and other
charges
INITIAL MEASUREMENTS
• The prevailing market rate of interest is actually the effective interest rate
Note: Cash flow relating to short term notes recievable are not discounted because the effect of
discounting is immaterial.
• Interest bearing
• Non-interest bearing
SUBSEQUENT MEASUREMENTS
• Subsequent to initial recognition longterm notes receivable shall be measured at a amortized cost
using the effective interest Method. The amortized cost method is in Accordance with PFRS 9, paragraph
5,2,1
• The amortized cost is the amount at which notes receivable is measure initially;
b. Plus or minus cumulative amortization of any difference between initial carrying amount and the
principal maturity amount
• For long term non interest bearing notes receivable, the amortized cost is the present value plus
amortization of the discount or the face amount minus unamortized earned interest income
•Only Long term interest bearing and non interest bearing notes receivable will be discussed in the
conjunction with the present value concept.
PRESENT VALUE - it is the discounted value of future cash flows using effective interest rate
PV Factor
PV of OA- is used when cashflow are equal installment and the first installment does not begin
immediately
PV of annuity- is used when cashflow re in qual.installmentand the first installment begins immediately