Current Assets Inventory, Work in Process

Inventory, Finished Goods Inventory,

and Factory Supplies Inventory.
 1. Cash and Cash Equivalents
 5. Prepaid Expenses or Prepayments
o Cash on Hand - consists of un-
o Prepayments consists of costs
deposited collections
already paid but are yet to be used
o Cash in Bank - made up of bank
or incurred. Common prepaid
accounts that are unrestricted as to
expense accounts include: Office
withdrawal
Supplies, Service Supplies, Prepaid
o Short-term cash funds such as Petty
Rent, and Prepaid Insurance.
Cash Fund, Payroll Fund, Tax Fund,
etc.
o Cash Equivalents are short-term
investments with very near maturity
dates making them assets that are
"as good as cash".
 2. Trading Securities or "Financial Assets at
Fair Value"
o Trading Securities are investments in
stocks that are held with the
purpose of trading (speculative
investments)
 3. Trade and Other Receivables
o Accounts Receivable - receivables
from customers arising from
rendering of services or sale of
goods
o Notes Receivable - receivables from
customers which are backed up by
promissory notes
o Other receivables representing
claims from other parties such as:
Rent Receivable, Interest Receivable,
Dividend Receivable, etc.
o Allowance for Bad Debts - a contra-
asset account deducted from
Accounts Receivable. It represents
the estimated uncollectible amount
of the receivable.
 4. Inventories
o Inventories are assets that are held
for sale in the normal operations of
the business. A service business
normally has no inventory account.
o Merchandising businesses normally
maintain one inventory account –
Merchandise Inventory.
o Manufacturing businesses have
several inventories: Raw Materials
Non-Current Assets Closed Banks, and Abandoned or Idle
Property
 1. Property, Plant, and Equipment (PPE)
There you have a list of asset accounts. Take note
also known as Fixed Assets
that different companies may use different
o PPE includes tangible assets that are
(although similar) sets of account titles. It will
expected to be used for more than
depend upon the company's business and industry,
one year. PPE accounts include:
and what specific accounts were adopted in its
Land, Building, Machinery, Service
chart of accounts.
Equipment, Computer Equipment,
Delivery Equipment, Furniture and
Fixtures, Leasehold Improvements,
etc.
o Take note that land that is not used
by the business in its operations but
is rather held for appreciation is not
part of PPE but of investments.
o Accumulated Depreciation - a
contra-asset account deducted from
the related PPE account. It
represents the decrease in value of
the asset due to continuous use,
passage of time, wear & tear, and
obsolescence.
 2. Long-Term Investments
o Investment in Long-Term Bonds,
Investment in Associate, Investment
in Subsidiary, Investment Property,
Long-Term Funds; these are
investments that are intended to be
held for more than one year.
 3. Intangibles
o An intangible has no physical form
but from which benefits can be
derived and its cost can be
measured reliably.
o Intangibles include Patent for
inventions, Copyright for authorship,
compositions and other literary
works,Trademark, Franchise, Lease
Rights, and Goodwill.
 4. Other Non-Current Assets
o Assets which cannot be classified
under the usual non-current asset
categories
o Includes: Advances to Officers,
Directors, and Employees not
collectible within one year, Cash in
 CHAPTER 5 Estimation of PERCENT OF ACCOUNTS RECEIVABLE
Doubtful accounts A certain rate is multiplied by the open accounts by the
end of the period in order to get the REQUIRED
3 METHODS OF ESTIMATING DOUBTFUL ACCOUNTS ALLOWANCE BALANCE

1. Aging the accounts receivable or “statement of
financial position approach”
2. Percent of accounts receivable or also
statement of financial position approach.
3. Percent of sales or “ income statement
approach”
 This procedure has the advantage of
PRESENTING THE ACCOUNTS RECEIVABLE AT
ESTIMATED NET REALIZABLE VALUE. The
approach is also simple to apply.
 Violates the principle of matching bad debt loss
against the sales revenue.

AGING OF ACCOUNTS RECEIVABLES

Involves : NOT DUE & PAST DUE

 This method has the advantage of presenting

fairly the accounts receivable in the statement
of financial position at net realizable value.
 It violates the mathing process
 Time consuming, if large number of accounts
are involved
 The AMOUNT COMPUTED by aging of accounts
receivable represent the required allowance for
doubtful accounts at the end of the period.

The CREDIT TERMS will determine whether an account

is past due.

PAST DUE – refers to the period beyond the maximum

credit term.
 Percent of sales DEBIT BALANCE IN ALLOWANCE
ACCOUNT
 The amount of sales per year is multiplied by a
certain rate to get doubtful accounts expense
 The rate is COMPUTED by dividing the bad debt
losses in the prior years by the charge sales of  It may be the policy of the entity to adjust the
prior years. allowance at the end of the period.
 This procedure of determining the rate has the  And record accounts written off during the
advantage of eliminating the extra work of year.
making a record of cash sales and credit sales.
 However this approach may prove
unsatisfactory when there is a considerable
fluctuation in the proportion of cash and credit
sales periodically.
 PROPER MATHING OF COST AGAINST REVENUE
IS ACHIEVED
This is so because the bad debt loss is
directly related to sales and reported in
the year of sale.
 INCOME STATEMENT APPROACH because it
favors the income statement.
 The accounts receivable may not be shown at
estimated realizable value because allowance
for doubtful accounts may prove excessive or
inadequate.

CORRECTION IN ALLOWANCE FOR

DOUBTFUL ACCOUNTS
 CHAPTER 6 – NOTES RECEIVABLE SUBSEQUENT MEASUREMENT
Notes Receivable- are claims supported by formal AMORTIZED COST- is the amount at which the note
promises to pay usually in the form of notes. receivable is measured initially :

NEGOTIABLE PROMISSORY NOTE- is an unconditional  Minus principal repayment

promise in writing made by one person to another,
signed by the maker, engaging to pay on demand or at
fixed determinable future time a sum certain in money
to order or to bearer.
PROMISSORY NOTE- is a written contract in which one
person, known as the maker, promises to pay another
person, known as the payee, a definite sum of money
DISHONORED NOTES
 Plus or minus cumulative amortization of any
difference between the initial carrying amount
and the principal maturity amount
 Minus reduction for impairment or
uncollectibility
For long term non interest bearing notes receivable, the
amortized cost is the present value plus amortization of
the discount, or the face value minus the unamortized
unearned interest income.

When a promissory note matures and is not paid.

Dishonored note receivable- should be removed from

the notes receivable and transfer to accounts
receivable.

INITIAL MEASUREMENT
 NOTES RECEIVABLE Measured initially at
PRESENT VALUE

PRESENT VALUE- the sum of all future cash

flows discounted using the prevailing market
rate of interest for similar notes.

 SHORT TERM NOTES RECEIVABLE measured

initially at FACE VALUE

Cash flow relating to short term notes

receivable are not discounted because the
effect of discounting is usually not material.

 LONG TERM NOTES RECEIVABLE

1. Interest bearing NR- FACE VALUE
Which is actually the present value
upon issuance

2. Non-interest bearing NR- PRESENT

VALUE
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