LESSON PLAN IN ACCOUNTS RECEIVABLE

I. OBJECTIVES
At the end of the lesson, the students should be able to:
A. classify the different items under accounts receivable;
B. compute for the initial and subsequent measurement of accounts receivable;
C. apply concepts on account receivable by solving problems with calculator; and
D. to independently and confidently work with problems of accounts receivable.

II. CONTENT
Topic: Accounts Receivable

A. Prior Knowledge:
a) Classification of assets
b) Presentation of current and non-current assets
c) Financial instruments
d) Examples of financial assets accounts

B. New Knowledge:
a) Define receivables
b) Classify and present receivables properly
c) Initial and subsequent measurement of accounts receivable under PFRS 9
d) Accounting for bad debts

C. Value: After studying the topic, the students should be able to adopt the values of:
a) compliance, by presenting the accounts receivable in accordance with generally accepted
accounting principles; and
b) integrity, by being fair and honest with the computation of accounts receivable balances.

III. RESOURCES

A. References
Intermediate Accounting Volume 1 by Valix, C.T. ; Peralta, J.F. and Valix, C.A.M
Intermediate Accounting 1A by Millan, Zeus Vernon B.
Practical Financial Accounting by Valix, C.T. and Valix, C.A.M

B. Materials
Powerpoint presentation, pen, calculator, columnar pads

C. Websites

IV. PROCESS

Teacher’s Activity Student’s Response Remarks

Good afternoon Class! “Good afternoon Ma’am/Sir”

First, let us have the opening prayer then I

will check the attendance.
Let’s us pray. In the name of
the Father, of the Son and of
the Holy Spirit, Amen.
Heavenly Father, we praise
and glorify Your Holy Name.
We give You thanks for giving
us another time to learn
virtually. May You forgive us
for all our shortcomings. 
Please help us focus our hearts
and minds so that we may be
 able to understand and learn
better.  And please grace us
with a stable internet
connection so that we won’t
encounter technical issues.
This all we ask in the Mighty
Name of Jesus, Amen. In the
name of the Father, of the Son
and of the Holy Spirit, Amen.

Thank you for that wonderful Prayer

Mr./Ms. (Student)

A.   INTRODUCTION
Motivation

Okay, let’s continue with our discussion.

Last meeting we talked about Financial
Instruments.

Financial instrument are contracts that

gives rise to both financial asset and
financial liability or equity instrument of
an entity.

So let’s have an interesting way to recall

the different examples of financial
instruments.

We will flash jumbled letter from the

presentation and you should be able to
identify the words being asked and [Students]: Yes ma’am /sir.
classify if it belong to a financial asset,
financial liability or equity instrument.

Are we all ready to answer?

Here are the scrambled letters.

Trade receivable ma’am,
Can you identify one and determine its classified as financial asset po.
classification?
Note Receivable ma’am, also a
financial asset po
Thank you Mr./Ms. (student)
Loans payable ma’am, a
Anyone else who would like to answer? financial liability po
There are a lot of choices.
Bonds payable ma’am, a
Thank you Mr./Ms. (student) financial liability

Let’s have one more student. Ordinary & Preference shares

po ma’am, classified as equity
That’s right, Thank you Mr./Ms. (student) instrument

And For the last one.

Okay! Thank you everyone for being able
to recall what we learned last meeting.
Keep up the good work!
Now, let’s take a look of our learning
objectives for today’s topic.

At the end of the lesson, the students

should be able to:
A. classify the different items under
accounts receivable;
B. compute for the initial and subsequent
measurement of accounts receivable;
C. apply concepts on account receivable
by solving problems with calculator; and
D. to independently and confidently work
with problems of accounts receivable.

B. INTERACTION
1. Presentation of Theory

a) Define receivables (STEPHEN)

Good afternoon class let’s define
receivables, receivables  are financial
assets that represent a contractual right to
receive cash or another financial asset
from another entity.
 
For retailer or manufacturers, receivable
are classified into trade receivables and
nontrade receivable [Student 2] Sir, trade
  receivables are…
Any idea about trade receivable? Okay
trade receivables are claims arising from
sale of merchandise or service in the
ordinary course of business

Who can give an example of trade  [Student] Sir, example of trade

receivables? Very good  receivable is
Accounts receivable are open accounts  
arising from the sale of goods and service  
in the ordinary course of business and not  
supported by promissory notes. Accounts  
receivable also known as customer  
accounts, trade debtors, and trade account  
receivable.  
   
On the other hand, notes receivable are  
those supported by formal promises to pay  
in the form of notes  
   
Does anyone here try to make a  
promissory note for payment of their  
tuition fee? Kindly raise your hand.
 

Now let's move forward to non- trade

receivables. These are claims arising from
sources other than the sale of merchandise
or service in the ordinary course of
business

Who can give an example of non trade

receivable? 
 [Student] Sir, one example of
Yes Mr/Ms. (Student) nontrade receivable is
All right! Thank you everyone. I will now
pass the discussion to Ms. Valmonte

b) Classify and present receivables

properly (JHENIEN)
Thank you Mr. Angeles.

Now  that we have learned the definition

of receivables, such as trade and nontrade
receivables; and loans receivables, let’s
move on to their proper classification and
presentation.

For this section of our lesson, let us focus

first on trade and nontrade receivables.
Again class, let’s go back to the basics of
accounting. How do you classify
receivables in the financial statements? 

Very good. So, if trade receivables are

expected to be realized in cash within the
normal operating cycle or one year,
whichever is longer, how do we classify
trade receivables in assets?

Exactly, since it is realized within the

normal operating cycle or one year, a
trade receivable should fall under the
current assets. [Student 3]: Assets, ma’am.

How about for the classification of

nontrade receivables, any volunteers?

Yes, [Student 3]. You are quite correct.

However, if we go back to the definition
of nontrade receivables, they are also
expected to be realized in cash within one
[Student 4]: Current assets,
one year.
ma’am.
Therefore, such trade receivables are still
classified as current assets.

But, as what [Student 3] has mentioned,

nontrade receivables can also be classified
as noncurrent assets if such receivables
are collectible beyond one year.

Please also note that these classifications

are in accordance with PAS 1,
Presentation of Financial Statements, [Student 5]: Noncurrent assets,
paragraph 66 which states that: ma’am.
“An entity shall classify an asset as
current when the entity expects to realize
the asset or intends to sell or consume it in
the entity’s normal operating cycle, or
when the entity expects to realize the asset
within twelve months after the reporting
period.”

Are we all clear now on how we classify

the receivables, class?

Now that we can already classify the

receivables properly, let’s move on to the
presentation.

Trade receivables and nontrade

receivables which are currently collected
shall be presented on the face of what
financial statement? [Students]: Yes, ma’am!

Another term for balance sheet, [Student

4]?

You are right! On the statement of

financial position as one line item

called trade and other receivables.

[Student 6]: Balance sheet
However, the details of the total trade and
other receivables shall be disclosed in the
[Student 6]: Statement of
notes to financial statements.
financial position, ma’am.
Let’s have an example. Please see the
presentation on the screen.
Note 1: Trade and other receivables
Accounts receivable P5,000,000
Allowance for doubtful account   (     200,000)
Notes receivable 1,000,000
Accrued interest on notes receivable   150,000
Advances to officers and employees  100,000
Dividends receivable      250,000
Total trade and other receivables P6,300,000

Now, I am turning over the floor for

further discussions to Ms. Aniciete. Ms.
Aniciete?
c) Initial and subsequent measurement of
accounts receivable under PFRS 9
(NICOLE)

Thank you, Ms. Valmonte!

Okay, now let’s discuss the initial and

subsequent measurement of accounts
receivable under Philippine Financial
Reporting Standards (PFRS 9)

First, initial recognition or at the date of

transaction. Accounts receivables are
initially recognized at
a) face amount
b) original invoice amount
d) amortized cost

Which is correct?

That’s right class, at initial recognition

accounts receivable are measured at face
amount or the original invoice amount

Then subsequently, it is measured at

amortized cost which is also known as
what?
[Students] A&B only ma’am
Thank you [Student 7]
Net realizable value is the amount
recoverable at the end of the reporting
date.

For accounts receivable, it is reduced by

adjustments which are in the ordinary
course of business.
[Student 7 ]: Net realizable
To arrive at the NRV we must consider value ma’am
the following allowances:

For freight charges, to record the sale:

Debit to accounts receivable and freight
out. Credit to sales and allowance for
freight charges.

For sales return

Debit to sales return. Credit to Allowance
for sales returns.
For sales discount
Debit to sales discount. Credit to
allowance for sales discount.
For doubtful accounts, it will be discussed
by Mr. Purisima

e) Accounting for bad debts (BREVIN)

f)
Thank you Ms. Flores
Any idea about Accounting for Bad
Debts?

Businesses allow customers to not pay in

cash to increase sales, but there are
instances of customers not paying their
debt. This will result in accounting for bad
debts.

There are two methods followed in

accounting for the loss incurred for bad
debts. These are allowance and direct
write-off methods.

For the allowance method, it requires

recognition of a bad debt loss if the [Student 8]: Accounting for
accounts are doubtful of collection. The bad debts is…
journal entry would be a debit to Doubtful
Accounts and a credit to Allowance for
Doubtful Accounts. If the doubtful
accounts are found to be uncollectible, the
account is written-off by a debit to
Allowance for Doubtful Accounts and a
credit to Accounts Receivable. If the
account is collected, just reverse the
previous entry stated.

For the direct write-off method, there is no

need to make an entry when an account is
considered doubtful. You should make an
entry when an account is proved to be
uncollectible, and the entry would be a
debit to Bad Debts Expense and a credit to
Accounts Receivable. And if the same
account is collected at a later date, the first
entry is a debit to Accounts Receivable
and a credit to Bad Debts. The second
entry will be a debit to Cash, and a credit
Accounts Receivable..

2. Application of Concepts
(KHYLE)
For example: Roxy Company provided
the following information relating to
accounts receivable for the current year:

Accounts Receivable : 1,300,000

Credit Sales: 5,400,000
Collections fr. cust. exclude recovery: 4,750,000
Accounts written off: 125,000 Collection
of accounts written off in prior year:
25,000 Estimated uncollectible receivables per
aging of receivables at Dec. 31: 165,000

The problem asks for the balance of the

accounts receivable before the allowance
for doubtful accounts, what is the first
step?

Then after that?

The collection from customers was

deducted in order to incorporate in the
computation the unpaid portion of the
credit sales, but why do we deduct the
accounts written off?
Student 9]: Firstly, is to add
the accounts receivable on
January 1 and Credit sales, and
it should arrive at 6,700,000.

Comprehensive problem: Student 10]: The collection

from customers and accounts
Faith Company provided the following written off will be deducted to
information relating to current operations: the total balance of 6,700,000
in order to arrive at Accounts
Accounts Receivable, January 1: 4,000,000 Receivable- Dec. 31 of
Accounts Receivable collected: 8,400,000 1,825,000
Cash sales: 2,000,000
Inventory, January 1: 4,800,000
Inventory, December 31: Student11]: As for accounts
4,400,000
Purchases: 8,000,000
written off some accounts were
Gross margin on sales: 4,200,000
proven worthless, and the entry
The problem is asking for the balance of made was a debit to allowance
accounts receivable on Dec. 31, what for doubtful accounts and a
would be our first step? credit to accounts receivable

The beginning balance of inventory will

be added to purchases to arrive at Goods
available for sale, then we deduct the
inventory, Dec.31 in order to arrive at the
Cost of Goods sold.
After that?

The problem wants us to work back in

order to get the credit sales, and in order
for us to get the amount of credit sales, we
must deduct the cash sales, and it will Student 12]: The Cost goods
arrive at the amount of credit sales which sold must be first computed…
is 10,600,000.

Then?

Student 13]: The Gross margin

will be added to the Cost of
goods sold in order to arrive at
gross sales.

C. INTEGRATION
3. Summary/ Synthesis
Define accounts receivable.
How do we classify Accounts Receivable?
How do we present Acocunts Receivable?
What is the initial measurement for
accounts receivable?
How do we measure accounts receivable
subsequently?
What does amortized cost mean?
What are the methods used in accounting
for bad debts?
Student 14]: The accounts
receivable - January 1 will be
added to arrive at the total
accounts receivable before
december 31, and then the
accounts receivable collected
will be deducted in order to
arrive at the accounts
receivable - December 31
balance, which is 6,200,000