RECEIVABLES- are financial asset that represent a
contractual right to receive cash or other financial asset
from another entity.
RETAILERS AND MANUFACTURING- trade receivables
and non-trade receivables.
TRADE RECEIVABLES- refers to claims arising from sale
of merchandise or services in the ordinary course of
business.
ACCOUNTS RECEIVABLES- are open accounts arising
from sale of goods and services in ordinary course of
business and NOT SUPPORTED BY PROMISSORY NOTES.
NOTES RECEIVABLE- are those supported by formal
promises to pay in the form of notes.
NON TRADE RECEIVABLES- arising from claims other
than the sale of merchandise or services in the ordinary
course of business.
LOANS RECEIVABLES- receivables result primarily from
loans to customers.
- Heterogeneous customers
- Repayment periods are frequently longer
CLASSIFICATION
TRADE RECEIVABLES & NON TRADE RECEIVABLES-
expected to be realized in cash within the normal
operating cycle or one year.
PRESENTATION
Trade and Non-trade receivables
- Statement of financial position
- One line item
- Trade and non-trade receivables
HOWEVER, the details of the total trade and other
receivables shall be disclosed in NOTES TO FINANCIAL
STATEMENTS.
INITIAL MEASUREMENT
- Initially at FAIR VALUE plus TRANSACTION COST
- The FAIR value of financial asset is usually
transaction price
- For short –term receivables, the fair value is
equal to the FACE AMOUNT or ORIGINAL
INVOICE AMOUNT
SUBSEQUENT MEASUREMENT
Amortized cost- the net realizable value of accounts
receivable
The NET REALIZABLE VALUE OF ACCOUNTS RECEIVABLE
is the amount of cash expected to be collected or
estimated recoverable amount.
In estimating the net realizable value of TRADE
ACCOUNTS RECEIVABLES, the following transactions are
made:
a. Allowance for freight charge
b. Allowance for sale return
c. Allowance for sale discount
d. Allowance for doubtful accounts
FOB Destination-
- means that the ownership of goods purchased is
vested in the buyer upon receipt thereof
- the seller shall be responsible for the freight charge
up to the point of destination.
FOB Shipping point
Means that the ownership of goods purchased is vested
in the buyer upon shipment thereof
- It is incumbent upon the buyer to pay for the
transportation charge from the point of
shipment to the point of destination.
Freight Collect
Means that the 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.
Freight Prepaid
Means that freight charge on the goods shipped is
already paid by the seller.
ACCOUNTING FOR FREIGHT CHARGE

1. An entity has a 100 000 accounts receivable at

the end of the period. The terms are 2/10, n/30,
FOB Destination and freight collect. The
customer paid freight charge of 5000.
a. To record the sale

Accounts receivable 100 000

Freight out 5 000
Sales 100 000
Allowance for freight charge 5 000
b. To record collection within the collection
period

Cash 93 000
Sale discount 2 000
Allowance for freight charge5 000
Accounts receivable 100 000