PROOF OF CASH ACCOUNTS RECEIVABLE

Two-date Bank Reconciliation Receivables

- Omitted information: (beg & end)
- Financial assets = contractual right to receive
 Book & Bank balance
cash / fin asset from another entity
 DIT & OC
TRADE Receivables

DIT – beg of month - From sale of mdse/service in ordinary business

Add: Cash RECEIPTS deposited during month - AR
Total deposits to be acknowledged by bank  Sale of goods and service from ordinary
Less: Deposits acknowledged by bank during month business
DIT – end of month  NO promi notes
 Customer account, trade debtors, trade
OC – beg of month AR
Add: Checks DRAWN by depositor during month - NR
Total checks to be paid by bank  WITH formal promises to pay in form of
Less: Checks paid by bank during month notes
OC – end of month
NON-TRADE Receivables
 ALL items debited (credited) to CIB which do
NOT represent deposits should be DEDUCTED - From other sources of sale of merchandise or
from book DEBITS (CREDITS) total to arrive at service in ordinary business
cash receipts deposited (to determine deposits
acknowledged by bank) a. Advances to (receivable from) shareholders,
direct, office/employee
 ALL items NOT representing CHECKS credited
to CIB which do NOT represent deposits should b. Advances to affiliates (subsidiary) = LTI
be DEDUCTED from book CREDITS total to
arrive at checks drawn by depositor c. Advances to supplier for acquisition of
merchandise = CURRENT
 ALL items DEBITED to account of depositor
not representing checks paid should be d. Subscriptions Receivable = CURRENT if
DEDUCTED from BANK DEBITS total to collectible within 1 year/ deduct from
arrive at checks PAID by bank subscription share capital

e. Creditors account with debit bal result of

Proof of Cash overpayment/return/allowances = CURRENT
- Expanded reconciliation including proof of But if NOT material, can be offset
receipts and disbursements
f. Special deposits on contract bids = NON-
COMPANY X CURRENT
PROOF OF CASH
For the Month of February
g. Accrued income dividend, accrued rent, accrued
Jan 31 Receipts Disbursements Feb 28
Bal per book royalties, accrued interest on bond investment =
Note collected CURRENT
Jan Example format only
Feb.. h. Claims receivable against common carriers for
Adj book bal
losses/damage; for rebates and tax refunds; from
insurance entity = CURRENT
Loans Receivable Accounting for BAD DEBTS loss

- Loans TO customers 1. ALLOWANCE Method

- Made to HETERO customer - Recognize bad debts loss if doubtful of collection
- Repayment frequently longer/over several years - Doubtful accounts
Allowance for DA
 Classify asset as CURRENT when expects to - If worthless / uncollectible- written off as:
realize asset, sell or consume it in normal ADA
operating cycle OR when expects to realize asset AR
WITHIN 12 months AFTER reporting period - GAAP requires this method because conforms
with matching principle
Customer’s CREDIT balances
2. DIRECT WRITEOFF Method
= CURRENT LIABILITIES - Recognize when proven worthless /
uncollectible
- Not offset against debit bal in other customers
- Bad debts
except when not material
AR
Initial Measurement of AR - BIR=for income tax puposes only
- Violates matching principle
- Fair Value (transaction price) + transaction cost - Not permitted under IFRS
- Short-term receivables- FV=orig/face amount
ALLOWANC DIRECT
E WRITEOFF
Subsequent Measurement Accounts of P30 are DA No entry
doubtful of collection ADA
- Amortized Cost – Net Realizable Value Subsequently ADA Bad Debts
- more relevance in long term NR discovered to be AR AR
- amount of cash expected to be worthless
collected/estimated recoverable amount Previously written AR AR
off are unexpectedly ADA Bad Debts
Net Realizable Value recovered / collected Cash Cash
AR AR
- deduct allowance for freight charge; sales
return; sales discount; doubtful accounts

Methods of recording Credit Sales Doubtful accounts in Income Statement

GROSS NET 1. Distribution Cost
Sale of Mdse AR AR - Selling/marketing expense
Sales Sales
- If granting of credit and collection under sales
Collection w/in discount Cash Cash
manager, doubtful accounts = distribution cost
SD AR
AR
Collection after discount Cash Cash 2. Administrative Expense
AR AR - General/office expense
SD forfeited - Under officer other than sales manager

 SD forfeited = Other Income  If silent=admin expense