TRADE AND NONTRADE RECEIVABLES

Trade Receivables
- claims arising from sale/ service from ordinary course of business
- includes accounts/notes receivable
- realized in one year or within the operating cycle whichever is longer
- current assets
Accounts Receivables
- open accounts arising from ordinary course of business
- customers’ accounts, trade debtors, and trade accounts receivable
Notes Receivables
- formal promise to pay(promissory note)
Nontrade Receivables
- claims arising from sources other than the ordinary course of business
- realized within one year, no matter the length of the operating cycle

PRESENTATION:
- current trade and nontrade shall be presented as a one line item “trade and other receivables” on
the face of the statement of financial position
- details are disclosed to notes to financial statements

EXAMPLES OF NONTRADE RECEIVABLES:

Current:
- advances/ receivables from shareholders/ members of the entity, classified as current/non
- advances to suppliers
- currently collectible subscription receivables
- creditors accounts with debit balance(customers with utang sa entity)
- dividends, accrued rent, accrued royalties, accrued interest receivable
- claims receivables: claims for losses or damages, rebates, tax refunds
Noncurrent:
- advances to affiliates
- special deposit on contracts bids, likely to remain outstanding for a long period of time

Customers’ credit balance

- results from overpayments, returns and allowances
- current liability

MEASUREMENT OF ACCOUNTS RECEIVABLES

- initially at face amount or original invoice amount plus directly attributable costs
- subsequently measured at amortized cost- net realizable value of a/r
Net realizable value
- initial amount reduced by adjustments, reduces the amount recoverable from the customer
Assets shall not be carried at above their recoverable amount
In estimating net value, ff deductions are made for allowances:
- freight charge
- Sales return
- Sales discount
- Doubtful accounts
METHODS OF RECORDING CREDIT SALES:
Gross method
- amounts are recorded without any deductions from discounts etc
- discounts are recorded when availed
Net method
- discount is recorded whether taken or not

ACCOUNTING FOR BAD DEBTS:

Allowance method
- requires allowance for doubtful accounts
- when considered as worthless, then it is written off
Direct writeoff
- recognizes loss when accounts prove to be worthless
- not permitted under IFRS
Recoveries of accounts written off
- recharge with the amount collected then record normally
- reverse the original entry written off
Entries:
Accounts receivable xx
Bad debts/Allow. For doubtful accounts xx
Cash xx
Accounts receivable xx