JPIA-HAU

– a statement which brings into agreement the cash

FINANCIAL ACCOUNTING balance per book and cash balance per bank.
AND REPORTING 1 Bank statement is a monthly report of the bank to
Cash and Cash Equivalents, Bank Reconciliation, the depositor showing: (a) cash balance per bank,
Receivables, and Receivable Financing
beginning; (b) deposits (c) checks drawn by
Overview of the Handouts: depositor and paid by the bank; (d) daily cash
1. Cash and Cash Equivalents balance per bank
2. Bank Reconciliation
Bank Reconciliation
3. Accounts Receivable Balance per book:
4. Notes Receivable Unadjusted balance per book xxx
5. Loan Receivables Add: Collected Note Receivable xxx
Less: NSF xxx
6. Receivable Financing Service Charge xxx (xxx)
Add/Less: Errors xxx
Adjusted balance per book xxx
1 CASH AND CASH EQUIVALENTS
1.1 Cash Balance per bank:
– not just currency and coins but also those that are Unadjusted balance per bank xxx
Add: Deposit in Transit xxx
acceptable by bank for deposit or immediate Less: Outstanding Checks (xxx)
encashment such as checks, bank drafts and Add/Less: Errors xxx
money orders. Adjusted balance per bank xxx
– measured at face value
– if in foreign currency, measured at current
exchange rate
3 ACCOUNTS RECEIVABLE
– any excess should be invested in revenue-earning
– are financial assets that represent a contractual
investment right to receive cash or another financial asset from
– deposits in foreign investment which are another entity.
subject to foreign exchange restriction, if material, – is an open account not supported by a promissory
should be classified separately among noncurrent note
assets and the restriction clearly indicated.
3.1 Trade Vs. Nontrade Receivables
Cash items: Trade: arising from ordinary course of business
⮚ Cash on hand – undeposited cash Non Trade: arising from sources other than from
⮚ Cash in bank – cash deposited in banks ordinary course of business
⮚ Cash fund – cash set aside for current Customers’ Credit Balances: results from
purposes such as petty cash fund, payroll overpayment, returns and allowances, and advance
fund, etc. payments from customers. These are treated as
current liabilities.
Petty Cash Fund – money set aside to pay small
expenses 3.2 Measurement
– two methods of handling: Initial: Fair value plus transaction costs that are
directly attributable to the acquisition.
a. Imprest fund system
b. Fluctuating fund system Subsequent: Net realizable value or estimated
recoverable amount
1.2 Cash Equivalent
- includes treasury bills, money market, and time 3.3 Net Realizable Value
Deductibles:
deposit with maturity of three months or less from
a. Allowance for freight charge
the date of purchase
1 FOB Shipping Freight Obligation by
Classification of T-bills, Money Market and Time Point Prepaid buyer, but paid by
Deposit: seller
⮚ Cash equivalent – if maturity is three months
2 FOB Freight Obligation by
or less from the date of acquisition; if the
Destination Collect seller, but paid by
problem is silent buyer
⮚ Current Asset (Separate line item) – if maturity
is more than three months but not exceeding 3 FOB Freight Obligation by seller
Destination Prepaid and paid by seller
a year
⮚ Non-current asset – if maturity is more than 4 FOB Shipping Freight Obligation by
one year Point Collect buyer and paid by
buyer
2 BANK RECONCILIATION

Financial Accounting and Reporting I Handout #2 - Cash and Cash Equivalents, Bank
Reconciliation, Receivables, and Receivable Financing
 JPIA-HAU
To record sale: Allowance for doubtful
Accounts Receivable accounts xxx
xxx Accounts
Freight out Receivable
xxx xxx
Sales
xxx
Allowance for
freight charge
xxx
Note: Direct written off method is prohibited under
IFRS because it violates the matching principle

3.4 Methods of Estimating Doubtful Accounts:

To record collection within discount period: a. Aging of accounts receivable
Cash b. Percent of accounts receivable
xxx c. Percent of sales
Sales
xxx 4 NOTES RECEIVABLE
Allowance for freight – are claims supported by formal promises to pay
charge xxx usually in the form of notes
Accounts – represents only claims arising from sale of
receivable xxx merchandise or service arising from the ordinary
course of business

4.1 Measurement
Initial: present value, except for short-term notes
b. Allowance for sales return
receivable which should be measured at face value
Sales return
xxx Subsequent: measured at amortized cost
Allowance for sales
return xxx Face Value of Note
Less: Present Value of Note
xxx
Unearned Interest Income
xxx

Present Value of Note

Cash received
c. Allowance for sales discount xxx
Sales Price
Sales Discount
Cost of Asset sold
xxx
xxx
5 LOAN RECEIVABLE
Allowance for sales
discount xxx – financialGain/Loss on a loan Sale
asset arising from granted by a
xxx financial institution to a borrower or
bank or other
client

5.1 Measurement
Initial: at fair value plus transaction cost that are
directly attributable to the acquisition of financial
asset
d. Allowance for doubtful accounts Subsequent: measured at amortized cost
Allowance Method *Initial amount recognized < principal amount =
Doubtful Accounts difference is added to carrying amount
Expense
xxx *initial amount recognized > principal amount =
Allowance for difference is deducted from the carrying amount.
doubtful accounts xxx
5.2 Origination Fees
-recognized as unearned interest income and
amortized over the term of the loan.

Direct Origination Costs

- deferred and amortized over loan term

Direct Write-off Method

Financial Accounting and Reporting I Handout #2 - Cash and Cash Equivalents, Bank
Reconciliation, Receivables, and Receivable Financing
 JPIA-HAU
Principal Amount
xxx Source: Intermediate Accounting Vol. 1 2020 edition by
Add: Origination fees Conrado T. Valix, Jose F. Peralta, Christian Aris M. Valix
xxx
Less: Direct origination
costs xxx
Initial Carrying Amount of
Loan xxx

5.3 Impairment of Loan

– an entity shall recognize a loss allowance for
expected credit losses on financial assets
measured at amortized cost
– credit losses are the present value of all cash
shortfalls
Credit risk – the risk that one party will cause a
financial loss for the other party by failing to
discharge an obligation
Carrying Amount of Loan
xxx
Present Value of cash
flows xxx
Impairment Loss
xxx

Loan Receivable - this

year xxx
Allowance for loan
impairment xxx
6 RECEIVABLE Carrying Amount - this
FINANCING
year xxx
– the financial flexibility or capability of an entity to
raise money out of its receivables

Forms of Receivable Financing:

a. Pledge of Accounts Receivable – accounts
receivables are pledged as collateral security for
the payment of the loan
b. Assignment of Accounts Receivable – the
assignor (borrower) transfers rights to some of
the rights in AR to a lender called the assignee
in consideration for a loan; evidenced by a
financing agreement and a promissory note
both of which the assignor assigns.
c. Factoring of Accounts Receivable - factoring
is a sale of AR on a without recourse, notification
basis; factor assumes responsibility for
uncollectible factored accounts. In assignment,
assignor retains ownership of the accounts
assigned.
i. Casual Factoring - normal sale of accounts
receivable, without other deductions
ii. Factoring as a continuing Agreement –
finance entity purchases all of the accounts
receivable of a certain entity
d. Discounting of Notes Receivable –to discount
the note the payee must endorse it; It may be
with
i. With recourse – the payee must pay the
bank if the maker (one liable) dishonors the
note
ii. Without recourse – the payee avoids future
liability even if the maker refuses to pay the
bank on the date of maturity

Financial Accounting and Reporting I Handout #2 - Cash and Cash Equivalents, Bank
Reconciliation, Receivables, and Receivable Financing