Accounting for

Receivables
Learning Objectives
1 Define receivables.
2 Differentiate the two methods in
accounting for uncollectibles accounts.
3 Compute bad debts based on a)
receivables and b) credit sales.
Prepare journal entries on bad debts or
4
uncollectible accounts.
5 Determine and compute the maturity date
and value of the note.
6 Compute note discounting

Ref.: Financial Accounting and Reporting 1, (Baldevarona, R.S.) 2020 Ed.

 Receivables
DEFINITION

Receivables are financial

assets that represent a
contractual right to
receive cash or another
financial asset from
another entity.
Ref.: Financial Accounting and Reporting 1, (Baldevarona, R.S.) 2020 Ed.
 Receivables
CAN BE

Trade Nontrade
Receivables arising from the sale of goods Receivables arising from other sources not
and services in the ordinary course of from the sale of goods and services.
business. - Interest receivables
- Accounts Receivables - Advances to employees
- Notes Receivables - Receivable from insurance companies

Ref.: Financial Accounting and Reporting 1, (Baldevarona, R.S.) 2020 Ed.

 Uncollectible Accounts
or Bad Debts
Business firms selling their goods and services on credit are not
certain of collecting 100% of their receivables. A certain
percentage of receivables may not be collected due to several
factors. This certain portion of receivables is called uncollectible
accounts or bad debts.

Ref.: Financial Accounting and Reporting 1, (Baldevarona, R.S.) 2020 Ed.

 The Accounting for
Bad Debts

1. Allowance Method

2. Direct Write Off Method

Ref.: Financial Accounting and Reporting 1, (Baldevarona, R.S.) 2020 Ed.

 Allowance Method Direct Write Off Method

1. The accounts amounting to P5,000 are considered as doubtful of collection

Bad Debts Expense 5,000 No entry

Allowance for Bad Debts

5,0000

2. The above accounts were discovered as worthless or uncollectible

Allowance for Bad Debts 5,000 Bad Debts Expense 5,000

Accounts Receivable Accounts Receivable

5,0000 5,000

Ref.: Financial Accounting and Reporting 1, (Baldevarona, R.S.) 2020 Ed.

 Allowance Method Direct Write Off Method
2. The above accounts were discovered as worthless or uncollectible

Allowance for Bad Debts 5,000 Bad Debts Exp 5,000

Accounts Receivable Accounts Receivable

5,0000 5,000

3. The same accounts that were previously written off were unexpectedly collected.

Accounts Receivable 5,000 Accounts Receivable 5,000

Allowance for Bad Debts Bad Debts Expense

5,000 5,000
Cash 5,000 Cash 5,000

Accounts Receivable Accounts Receivable 5,000

5,000

Ref.: Financial Accounting and Reporting 1, (Baldevarona, R.S.) 2020 Ed.

 Percentage of net credit
1
Methods of sales

Estimating
Percentage of
Doubtful 2 receivables
Accounts/Bad
Debts 3
Aging of accounts
receivables
Ref.: Financial Accounting and Reporting 1, (Baldevarona, R.S.) 2020 Ed.
 Percentage of net credit sales
 Bad debts are computed by multiplying the amount of
sales by the company’s experience rate of uncolectible
accounts.
To illustrate: Apple Company estimated that 1% of its net credit
sales amounting to P3,000,000 is uncollectible.

The entry to record bad debts should be:

Bad Debts Expense 30,000
Allowance for bad debts 30,000
(3,000,000 x 1%)

Ref.: Financial Accounting and Reporting 1, (Baldevarona, R.S.) 2020 Ed.

 Percentage of accounts receivable
 Bad debts are computed by multiplying the amount of accounts
receivable by the company’s experience rate of uncolectible
accounts.

To illustrate: Apple Company has an outstanding balance for accounts

receivable of P1,190,000 with allowance for bad debts per books of P15,000.
Apple estimated that 3% of the A/R is uncollectible.

The entry to record bad debts should be:

Bad Debts Expense 20,700
Allowance for bad debts 20,700

Ref.: Financial Accounting and Reporting 1, (Baldevarona, R.S.) 2020 Ed.

 Aging of Accounts Receivable
 The receivables are classified as current or not yet due, and
past due or overdue.
To illustrate: Apple Company’s aging schedule of receivable as of
December 2023 showed the following:
Outstanding Bal. % of Required
uncollectibility allowance
Current or not yet due P 600,000 1% P 6,000
1-60 days overdue 200,000 2% 4,000
61-120 days overdue 150,000 3% 4,500
121-180 days overdue 100,000 5% 5,000
181-360 days overdue 75,000 10% 7,500
More than one year 50,000 15% 7,500
Ref.: Financial Accounting and Reporting 1, (Baldevarona, R.S.) 2020 Ed. 34,500
 Notes Notes receivables are evidenced by a
promissory note. A promissory note is a

Receivable written unconditional promise to pay the

lender or someone else who acquires the note,
a sum certain in money, on demand or at a
definite time, signed by the maker.

1. Maker – made and signed the note and

makes payment upon due date.
2. Payee – receives payment upon due date.

A note can either be interest or non-interest

bearing.

Ref.: Financial Accounting and Reporting 1, (Baldevarona, R.S.) 2020 Ed.

 Calculation Interest = Principal x Rate x Time
Example: Note amounting to P100,000 at
of Interest 10%. Term of the note is 90 days.

I = 100,000 x 10% x 90/360

I = 2,500

Ref.: Financial Accounting and Reporting 1, (Baldevarona, R.S.) 2020 Ed.

 How to determine the maturity date if the term of the note is in number of days?
S
Lovely issued a 12%, 120-day note to Sweet on March 1, 2023.

1. Determine the term of the note. Term of the note 120 days
2. From the term of the note, deduct the
STRENGTHS Days remaining in March (31-1) THREATS
- 30
remaining number of days in the month --------
What are you doing What are the
the note is issued. Number of days remaining 90
well? What sets you blockers you're
3. Deduct the number of days in the April - 30
apart? What are your facing? What are
succeeding months until the balance does --------
good qualities? factors outside of
not exceed the number of days in the Balance 60
your control?
month. May - 31
4. The due date is the last month to be --------
deducted and remaining days will be the June 29
day of the maturity date.

Ref.: Financial Accounting and Reporting 1, (Baldevarona, R.S.) 2020 Ed.

 Discounting of Notes
Without Recourse
The holder of the note might need additional capital to finance
his business operations. Instead of holding the note, he may
transfer the note to the bank by endorsing the said note. The
bank will compute the discount and deduct it from the maturity
value of the note for the period the bank holds the note until
the maturity date.

Ref.: Financial Accounting and Reporting 1, (Baldevarona, R.S.) 2020 Ed.

 Illustration
Lovely issued a P100,000 12%. 120-day note to Sweet on March 1, 2023,
which will mature on June 29. The note was discounted in May 25 at
Good Bank at 15%
The discount and cash proceeds are computed as follows:

1. Compute for Maturity Value

Maturity Value = Principal + Interest
2. Compute for the discount
Discount = Maturity Value x Discount rate x Discount Period
3. Compute the Net Proceeds from discounting
Net Proceeds = Maturity Value – Discount
4. Compute the carrying amount of the note receivable.
Carrying Amount = Principal + Accrued interest receivable
5. Determine the gain or loss on the discounting of the note.
Ref.: Financial Accounting and Reporting 1, (Baldevarona, R.S.) 2020 Ed.
Thank you!

Got any
questions?
 Name:
Company Name:
Contact Number: 123-456-7890
Email Address: hello@reallygreatsite.com

Character Name of Character Reference

Company Name
Contact Number: 123-456-7890

References Email Address: hello@reallygreatsite.com

Name of Character Reference

Company Name
Contact Number: 123-456-7890
Email Address: hello@reallygreatsite.com
Work
WRITE YOUR FIRST JOB POSITION HERE.
Company Name (Inclusive dates)

History
Describe the work you did for this particular job position.

WRITE YOUR FIRST JOB POSITION HERE.

Company Name (Inclusive dates)
Describe the work you did for this particular job position.

WRITE YOUR FIRST JOB POSITION HERE.

Company Name (Inclusive dates)
Describe the work you did for this particular job position.
Skills and
Proficiencies

TECHNICAL SKILLS SOFT SKILLS APPLICATIONS

• List them down here • List them down here • List them down here
• List them down here • List them down here • List them down here
• List them down here • List them down here • List them down here
 Write your topic or idea

ADD A MAIN POINT ADD A MAIN POINT ADD A MAIN POINT

Briefly elaborate on what you Briefly elaborate on what you Briefly elaborate on what you
want to discuss. want to discuss. want to discuss.
 It's so lovely
to meet all of you!
Thank you for listening.
How to Use This
Presentation
GOOGLE SLIDES
• Click on the "Google Slides"
button below this presentation
preview.
• Click on "Make a copy."
• Start editing your presentation.
• You need to sign in to your
Google account.
POWERPOINT
• Click on the "PowerPoint" button
below this presentation preview.
• Start editing your presentation.
• Download and install the fonts
used in this presentation as
listed on page 21.
CANVA
• Click on the "Canva" button
under this presentation preview.
• Start editing your presentation.
• You need to sign in to your
Canva account.
 Add a Team Members Page
Elaborate on what you want to discuss.

NAME NAME NAME NAME

Title or Position Title or Position Title or Position Title or Position
Add a
Section Header
Write Your Big Elaborate on what you

Topic or Idea want to discuss.

Write a caption for the photos.
Write a caption for the photos.
123,456,789
Elaborate on the featured statistic.
2 out 5
Elaborate on the featured statistic.

95%
Elaborate on the featured statistic.

123 million
Elaborate on the featured statistic.
Credits
Special thanks to all the people who made and released
these awesome resources for free:

1 Presentation template by SlidesCarnival

2 Photographs by Pexels

HAPPY DESIGNING!
 This presentation template uses the following
Fonts In this free fonts:

Presentation
1 Titles: Rubik

2 Headers: Rubik

3 Body Copy: Rubik

YOU CAN FIND THESE FONTS ONLINE TOO.

HAPPY DESIGNING!
Add a
Timeline Page

ADD A MAIN POINT ADD A MAIN POINT ADD A MAIN POINT ADD A MAIN POINT
Elaborate on what you Elaborate on what you Elaborate on what you Elaborate on what you
want to discuss. want to discuss. want to discuss. want to discuss.
 S W O T
STRENGTHS WEAKNESSES OPPORTUNITIES THREATS
What are you doing Where do you need What are your goals? What are the
well? What sets you to improve? Are Are demands blockers you're
apart? What are your resources shifting? How can it facing? What are
good qualities? adequate? What do be improved? factors outside of
others do better your control?
than you?
 Item 5 Item 1
20% 20%

Write Your Topic

or Idea Item 4 Item 2
20% 20%
Elaborate on what you want to discuss.

Item 3
20%
 Add a Chart Page
NAME
Job Title

NAME NAME
Job Title Job Title

NAME NAME NAME NAME

Job Title Job Title Job Title Job Title
Icons
Resource
Page

Use these design resources in your

Presentation. Happy designing!

Don't forget to delete this page before

presenting.
Elements
Resource
Page

Use these design resources in your

Presentation. Happy designing!

Don't forget to delete this page before

presenting.
 Free templates for all your presentation needs

For PowerPoint and 100% free for personal or Ready to use, professional Blow your audience away
Google Slides commercial use and customizable with attractive visuals