ACCOUNTS RECEIVABLE

Accounts receivable are open accounts arising the sale of merchandise or services in the ordinary
course of business and not supported by promisory notes.
 Open account – meaning hindi pa sya bayad.
 Kasama sa ordinary course of business.
 Mga receivable na nag arise kasi meron kang customer at pumayag ka na pautangin sila kahit
walang promisory notes.
 But that doesn’t mean na ang Accounts receivable ay wala talagang kahit anong dokumento.
Meron tayong tinatawag na invoice o ‘’SALES INVOICE’’
 ALWAYS CURRENT.

MEASUREMENT

INITIAL MEASUREMENT ( FAIR VALUE + TRANSACTION COST )

PFRS 9 provides that a financial asset shall be recognized INIATIALLY at FAIR VALUE +
TRANSACTION COSTS that are directly attributable to the acquisition.

- Initially means yung first time syang lumabas, magkano sya. That’s the initial measurement.
- Transaction cost - is yung mga gastos na necessary para matuloy yung receivable.
- How do we measure Initially kapag ACCOUNTS RECEIVABLE?
MEASUREMENT: FACE VALUE.
- Same lang naman yung formula ng Fair value at Face value. Ito lang ay very specific sa
receivable lang. Dahil nga ito ay pang lahatan/GENERAL.
FACE VALUE.
What does it mean by FACE VALUE sa POV ng Accounts receivable?
NEGOSYO merong binenta na pautang. A/R. Pero meron paring dokumento:
INVOICE

100,000

THIS IS THE FACE VALUE

- Therefore pwede din nating tawagin yung FACE VALUE na ‘’ORIGINAL INVOICE VALUE’’
SUBSEQUENT MEASUREMENT @ AMORTIZED COST
In accordance with PFRS 9, after initial recognition, Accounts Receivable shall be measure
@AMORTIZED COSTS.
- The amortized costs is actually the NET REALIZABLE VALUE of Accounts Receivable.
- How do we measure subsequently? Yan yung kasunod na panahon, hindi ngayon.
- How do we measure Subsequently kapag ACCOUNTS RECEIVABLE?
MEASUREMENT: NET REALIZABLE VALUE.
- Same lang naman yung ibig sabihin ng AMORTIZED COST at NRV in a sense na hindi modaw
sya ime-measure kung magkano sya nung una but rather dun talaga sa kung magkano mo sya
totoong makokolekta.
- Kasi may mga chances na yung receivable mo e.g 100,000 invoice price ay hindi mo na
makokolekta ng buo dahil maraming mga p’pwedeng mabago e.g sa tao o sa sitwasyon.
- So therefore ine-rereduce natin sya sa kung magkano lang yung marerecover mo.
- Therefore this NRV is the same as RECOVERABLE ACCOUNT. Which is yung pinakang
makokolekta mo lang.
- Malamang meron kang binabawas dahil sabi nga sa term ‘’NET’’ RV.

NET REALIZABLE VALUE

The initial amount recognized fro accounts receivable shall be reduced by adjustments which in
the ordinary course of business will reduce the amount recoverable from the customer.

This is based on the established basic principle that assets shall not be carried at above theor
recoverable amount.

Accordingly, in estimating the NET REALIZABLE VALUE of TRADE ACCOUNT RECEIVABLE, the
following deductions are made:

1. Allowance for sales discount

2. Allowance for sales return
3. Allowance for freight
4. Allowance for bad debts/doubtful accounts

HOW TO COMPUTE?
- Meron tayong FACE VALUE which is the Accounts Receivable
- Then later on Subsequently ine-NET natin so meron tayong mga ibabawas na mga
ALLOWANCES na basically 4 Allowancest. When we say allowance hindi sya yung mismong
exact amount. But rather that is an estimate.
 Accounts Receivable xx
Less: Allowance xx
Allowance xx
Alloiwance xx
Allowance xx
Net realizable Value xx = amount na totoong makokolekta.

- Bakit may mga allowances na mina-minus para makuha yung NET REALIALIZABLE VALUE? Bat
hindi nalang yung FACE VALUE yung gamitin?
- The answer is can be found in what we call ‘’MATCHING PRINCIPLE’’

 ‘’MATCHING PRINCIPLE’’ means kung nasaan ang GAIN dapat nandun din dapat ang lahat ng
related expenses.
- Diba ang receivable is because you make a sale? Paano kung sakaling 2021 ka nag karoon ng
SALES na basically that is Revenue. Saan badaw dapat irecord lahat ng EXPENSES? And the
answer is also in this period (2021)

REVENUE - SALES

EXPENSES 2021

 Paano naman kung sakali if yung mga totoong EXPENSES is pertaining to that credit SALE
Accounts receivable ay mangyayari pa lagpas sa 2021?. Therefore kung dyan nakarecord yung
actua event. Hindi mo dun irerecord yung expense. Kasi nga mavaviolate yung matching
principle.

REVENUE/SALES ALLOWANCE FOR BAD DEBTS

EXPENSES 2021 2022

- Therefore, I-estimate mo nalang kung sakali man. Lalagyan nalang natin ng tinatawag na
‘’ALLOWANCE FOR BAD DEBTS’’

Accounts Receivable xx
Less: Allowance xx
Allowance xx
Alloiwance xx
Allowance for bad debts xx
Net realizable Value xx
- ALLOWANCE FOR BAD DEBTS – means utang na p’pwedeng hindi na mabayaran.
- So kelan ‘to pwedeng magyari? P’pwedeng hindi 2021 but rather 2022.
- So therefore kelan yung actual BAD DEBTS? Later pa.
- So kelan mo irerecord yung expense? Dulo ng 2022 to dulo ng 2021. Para yung Revenue at
Expenses ay mairelate.
REVENUE/SALES ALLOWANCE FOR BAD DEBTS

EXPENSES 2021 2022 actual expense

- Kung sakali man na nasa kabila yung Actual event ( 2022 ) Wala na dun yung expense kasi
nairecord mona lahat sa EXPENSES ng 2021. Para hindi mo maviolate yung matching principle
kaya mo sya ine-estimate.
- Pero papaano ba mag estimate? Titingnan mo lang yung Historical records mo. Yung parang
normal na nangyayari kasi malamang through experience nasasanay kana sa pagpapautang,
maaring merong hindi nagbabayad.

4 ALLOWANCES:
1. Allowance for sales discount
2. Allowance for sales return
3. Allowance for freight
4. Allowance for bad debts/doubtful accounts

- Pwede rin palang magkaron ng allowances yang mga yan? YES.

- Kasi syempre pano kung later period pa mangyayari, later on pa. E ang sales is nasa left side.
So therefore kung kaya mo namang eestimate yang mga yan gawin mo na din para makwenta
mo at the end of the period yung subsequent measurement yung TAMANG NET REALIZABLE
VALUE.
THE QUESTION IS: Bakit inaallow na yung mga Allowances ay actual din yung nangyayari? Kasi
ang ang Accounts Receivable, genrally ay short term.

REVENUE – SALES discount

allowances
freight

*
*
EXPENSES 2021 2022
 - Kasi kung eto yung 2021 at dyan sa nangyari yung sales, most of the time dyan din nagyayari
yung discount, allowance at freight kaya NO NEED na to make an allowance.
- At ang isa pa because of the concept of materiality.
- Baka kasi mamaya Immaterial naman yung amount. At baka isa pa baka nag ooffset-offset din
naman. Kasi maaring yung iilan ay immaterial sa 2022 nangyayari na dapat ay nasa loob ng
2021. At yung sa 2022 mag mga dapat dung mangyari pero nasa 2023 nangyayari.
- In short yung error na dapat ay para sa 2021 ay baka naooffset sa 2022. That’swhy there’s a
need for Allowances.
- PERO ANG PINAKA TAMA PADIN AY GUMAMIT NG ALLOWANCES!!!

1. ALLOWANCE FOR SALES DISCOUNT

TRADE DISCOUNT ( NOT RECORDED )
DISCOUNT
CASH DISCOUNT

TRADE DISCOUNT – is not recorded. Hindi sya yung mina-minus to get the NRV. Kasi yung mga
discount na ‘to is mga ‘’TAWAD’’ which means nakadiscount pero dahil sa tawad.
- Bakit hindi sya nirerecord? Una alam na nung tindero na tatawad ka that’s why tinaasan nya na
yung presyo nung paninda nya hindi mo alam yung binigay nya na tawad sayo is the real price
ng paninda nya. To stimulate sales lang.
- Pangalawa dahil wala sa invoice.

Entity usually offer cash discounts to credit customers.

CASH DISCOUNT – a cash discount is knows a s sales discount on the part of the seller and a
purchase discount on the part of the buyer. A cash discount is a reduction from an invoice price by
reason of prompt payment.

- prompt payment – means mas maagang pagbabayad. Kasi normally sa isang receivable
transactions sa isang utangan, may credit term. Hindi yan yung tipong papautangin ka at
babayaran mo kung kelan mo gusto.
- It means na kapag pinautang yung customer authomatically nagbibigay ng credit terms.
- Kung sinabi na na within 30 days. Therefore isulat mo. N/30 the number of days kung kelan
nya dapat mabayaran.
- And then ilalagay na yung discount to encourage prompt payment. Like kapag nabayaran mo
within 10 DAYS, bibigyan kita ng 2 % discount o mababawasan yung babayaran mo ng 2%.
2%/10
 2%/10 N/30

THIS IS JUST THE WAY TO ENCOURAGE PROMPT PAYMENT.

- Pero kapag lumapas like nakapag hulog ka ng 15 or 30 na mismo. Therefore wala ka ng

discount.
THE QUESTION IS: Bakit kasama sya sa computation ng NET REALIZABLE VALUE?
- Kase yung base nito is yung invoice price. E.g 100,000 kung ano yung nakasulat sa invoice.
That’s why yung 2% pala ay maaari na doon mai-babase.
- And also makokolekta mo ba yung 2% ? NO. Kasi nga idiniscount mo, that’s why it’s being
deducted

2. ALLOWANCE FOR SALES RETURN AND ALLOWANCES.

THE QUESTION IS: Bakit kasama sya sa computation ng NET REALIZABLE VALUE?
- Kasi natural hindi mo rin naman makokolekta yan.
- Pag nagka receivable ka kasi may binigay kang paninda. The fact na sinauli o nireturn,
makokolekta mo pa ba? Diba HINDI na.
Anong pagkakaiba ng SALES RETURN and SALES ALLOWANCE?
SALES RETURN – there’s a damage and there’s physical return of transfer of merchandise.
SALES ALLOWANCE – there’s a reduction of price because there is a damage just like sales
return but there’s no physical transfer of merchandise. Babawasan lang yung presyo.
- Yung pagbaba ba ng presyo is discount? NO BUT RATHER ALLOWANCE.
- Kase in discount walang damage nakatawad ka lang. Sa allowance may damage.

3. ALLOWANCE FOR FREIGHT.

- When we say yan po yung TRANSPORTATION COST.
FOB DESTINATION
FOB ( FREE ON BOARD )
FOB SHIPPING POINT

- FOB ( FREE ON BOARD ) -nalalaman kung sino ang magbabayad ng FREIGHT/

TRANSPORTATION COST.
- Dito nalalaman kung sino yung magrerecord ng expense nung FREIGHT.

FREIGHT IN
FREIGHT
 FREIGHT OUT

FREIGHT IN – kung ikaw yung buyer

FREIGHT OUT – kung ikaw yung seller.

- Dahil receivable ang assumption tayo yung SELLER that’s why FREIGHT OUT.
- Kung nasayo yung FOB at ikaw yung seller, irerecordmo yun.

WHO WILL ACTUALLY PAYS THE FREIGHT:

FREIGHT PREPAID
FREIGHT
FREIGHT COLLECT

SHIPPPER

BUYER SELLER

- Si Buyer at si Seller ay mag uusap kung sino ang magbabayad ng FREIGHT. Yung kanilang
usapan ay naka depende dun sa FOB.

FOB DISTINATION (SELLER)

– means itatransfer yung ownership ng goods pagdating sa Destination.
RULES: WHO OWNS THE GOODS MUST SHOULDER THE FREIGHT
E sino ba yung may ari ng goods habang nasa byahe pa? edi si SELLER so it means if FOB
DESTINATION the who will pay for the freight is si Seller pa. Kasi itatransfer palang yung
ownership e.

FOB SHIPPING POINT (BUYER)

– means itatransfer na agad yung ownership sa buyer like sa shipping point mismo.
RULES: WHO OWNS THE GOODS MUST SHOULDER THE FREIGHT.
E sino ba yung may ari ng goods habang nasa byahe pa? si BUYER na it means na if FOB
SHIPPING POINT the who will pay for the freight is the Buyer na.
 Yung FOB is usapan ni BUYER and SELLER. But the SHIPPER is meron ding sariling kontrata.
Sakanya actually nakadikit yung FREIGHT PREPAID at FREIGHT COLLECT.

FREIGHT PREPAID (SELLER)

- Macoconnect sa concept ng PREPAID EXPENSE. In a sense na naunang bayaran bago
gawin yung service.

FREIGHT PREPAID means that freight charge on the goods shipped is already paid by the
seller.

SHIPPPER SHIIPER’S OFFICE

BUYER SELLER

- Si Shipper ay meron ding office na pwedeng nasa lugar ng BUYER at SELLER.

- Let’s say na ang Office ni SHIPPER ay nasa lugar ni SELLER at wala pang MONEY TRANSFER that
time. Sino ang makakapagbayad actually? Si SELLER na agad.
- E.G. Kung sakali na merong sasakay sa shipping point ni SELLER, hindi mo papasakayin ng
walang bayad.
- Maniningil na agad si shipper kahit hindi pa naglalayag.
- At sa kung sakaling naglayag na wala ng babayaran si BUYER.
 FREIGHT COLLECT (BUYER)
FREIGHT COLLECT means that freight charge on the goods shipped is not yet paid. The
common carrier shall collect the same from the buyer. Thus, under this, the freight charge is
actually paid by the buyer.

SHIPPER’S OFFICE

SHIPPPER

BUYER SELLER

- Ang Office ni SHIPPER ay nasa lugar ni BUYER.

- In a sense na pagsakay mo walang bayad. Yung pagbaba ang meron. Kaya nga ang sabi
‘’COLLECT’’
- Therefore what will happen?
- Kahit gustuhin ni SELLER na magbayad ng CASH para sa FREIGHT. hindi tatangapin nung mga
nakasakay sa bangka dahil sasabihin nila na wala naman silang opisina don.
- There fore pagdating sa destination ni BUYER tsaka palang babayaran.
- Sino ang makakapagbayad actually? Si BUYER na.
THE QUESTION IS: Bakit kasama sya sa computation ng NET REALIZABLE VALUE?
- May mga pagkakataon na si Seller ang magbabayad ng FREIGHT kasi nga ang usapan ay FOB
DESTINATION. Pero nagkataon na hindi PREPAID but rather COLLECT.
- So sino magbabayad? si BUYER na kasi nandoon yung office e.
- So what does it mean? Maaring may epekto yun sa balance nung accounts receivable. Kasi
sasabihin nung isa ‘’may utang naman ako sayo, idagdag mo nalang or ibawas’’ depende sa
scenario.
- That’s why nababago o naapektuhan din ang NET REALIZABLE VALUE dahil sa mga FREIGHT.
- Paano kung si BUYER yung nagbayad ng freight na dapat ay ikaw (SELLER)
Therefore kapag kokolektahin mo sya mababawasan ba ang makokoleta mo? YES!
THAT’S WHY IT’S BEING DEDUCTED.
 ETO YUNG MGA ACCOUNT NA MAARING HINDI NA MABAYARAN SAYO AT INI-ESTIMATE MO YAN
KAYA NAKAKABAWAS SYA SA ACCOUNTS RECEIVABLE TO GET THE NET REALIZABLE VALUE.

JOURNAL ENTRY ON RECEIVABLE.

Methods of recording Credit Sales
1. GROSS METHOD
The accounts receivable and sales are recorded at GROSS AMOUNT OF THE INVOICE. This is
the common and widely used method because it is simple to apply.
- It means hindi mo cinoconsider yung mga allowances, yung usual mong hinagawa. E.G
pinautang mo sya ng 10K therefore irerecord mo yung 10K itself.
- In Gross method like nirerecord mo AS IS kung magkano yung pinakang total, then later on
kung may mga nangyaring allowances tsaka natin sya binabawas.
- Which is in practice sya yung pinaka acceptable kasi hindi sya mahirap gawin.
- Isa din sa dahilan kasi SHORT TERM nga yung RECEIVABLE.

2. NET METHOD
The accounts receivable and sales are recorded at NET AMOUNT OF THE INVOICE meaning the
invoice price minus the cash discount.
- We recorded it at NET AMOUNT immediately. Kasi ang punto nga naman, mas maganda na
irecord na agad sa pinakang amount na makokolekta talaga.
- Then later on wala ka ng gagawing adjustments sa mga ALLOWANCES. Kasi nga na NET
mona. Nabawas mo na.
- Pero kung sakali na ineexpect mo na na mangyayari yung mga Allowances pero hindi
nangyari YOU HAVE TO REVERT IT BACK! Like kung sakaling meron palang kailangang
idagdag. So therefore ibabalik mo yung dati mong binawas.