Written Report Surenaaaaaa

Republic of the Philippines
North Eastern Mindanao State University

Formerly Surigao del Sur State University
Rosario, Tandag City, Surigao del Sur 8300
Telefax No. 086-214-4221
Website: www.sdssu.edu.ph
______________________________________________________________________________
NORTH EASTERN MINDANAO STATE UNIVERSITY
COLLEGE OF BUSINESS AND MANAGEMENT
Department of Business Management
A Written Report on: Credit and Collection
Submitted by:
CANDA, Leah A.
DEGUITO, Wilriza
DIAZ, Jay B.
HILO, Kristine May A.
MAQUILING, Prescious Ann M.
PLAZA, Erika L.
POLINAR, Asis James S.
REMORTA, Domilyn
Submitted to:
Dr. Floresito D. Calub
3FMA MTh 7:30-9:00am

Telefax No. 086-214-4221
______________________________________________________________________________
TOPIC I
SOURCES OF CREDIT
What is Credit?
Credit is an arrangement between two parties wherein one party receives a certain sum
of money or an item of value from another. Credit is in the form of a contract and is given
against an agreement to repay the amount after the expiry of a certain period of time.
Businesses are in regular need of credit as funds are always scarce.
Moreover, it will require funds to expand its business too. Hence, businesses remain on
the lookout for additional sources of credit/finances to meet their fund requirements.
Similarly, individuals also seek credit for meeting their day-to-day expenditures as well
as for funding their education or for, buying a car or a home or a home appliance, etc.
Credit Is Either Closed- or Open-End Consumer credit falls into two broad categories:
Closed-end (installments)- This form of credit is used for a specific purpose, for a
specific amount, and for a specific period of time. Payments are usually of equal
amounts. Mortgage loans and automobile loans are examples of closed-end credit. An
agreement, or contract, lists the repayment terms, such as the number of payments, the
payment amount, and how much the credit will cost.
Open-end (revolving)- open-end, or revolving credit, loans are made on a continuous
basis as you purchase items, and you are billed periodically to make at least partial
Telefax No. 086-214-4221
______________________________________________________________________________
payment. Using a credit card issued by a store, a bank card such as VISA or MasterCard,
or overdraft protection are examples of open-end credit.
SOURCES OF CREDIT
Financial Intermediaries
Financial intermediaries -serve as middlemen for financial transactions, generally
between banks or funds. These intermediaries help create efficient markets and lower the
cost of doing business. Intermediaries can provide leasing or factoring services, but do
not accept deposits from the public.
Financial institutions
 dedicated credit companies that work just for disbursing credit. A financial institution
(FI) is a company engaged in the business of dealing with financial and monetary
transactions such as deposits, loans, investments, and currency exchange. Financial
institutions include a broad range of business operations within the financial services
sector, including banks, insurance companies, brokerage firms, and investment dealers.
 Financial institutions vary by size, scope, and geography.
 At the most basic level, financial institutions allow people to access the money they
need. For example, although banks do many things, their primary role is to take in funds
—called deposits—from those with money, pool the deposits, and lend the money to
others who need funds. Banks are intermediaries between depositors (who lend money
to the bank) and borrowers (who the bank lends money to).
Telefax No. 086-214-4221
______________________________________________________________________________
Investment Houses
 An investment property is purchased with the intention of earning a return through rental
income, the future resale of the property, or both
 Properties can represent a short- or long-term investment opportunity.
 Investment properties are not primary residences or second homes, which makes it
harder for investors to secure financing.
 Selling an investment property must be reported, and may result in capital gains, which
can have tax implications for investors.
 Types of investment Property
1. Residential Rental homes -are a popular way for investors to supplement their
income. An investor who purchases a residential property and rents it out to tenants can
collect monthly rents.
2. Commercial income -generating properties don't always have to be residential. Some
investors—especially corporations—purchase commercial properties that are used
specifically for business purposes.
3. Mixed-Use - a mixed-use property can be used simultaneously for both commercial
and residential purposes. For instance, a building may have a retail storefront on the
main floor such as a convenience store, bar, or restaurant, while the upper portion of the
structure houses residential units.
4. Financing Investment Properties - while borrowers who secure a loan for their
primary residence have access to an array of financing options including FHA loans, VA
Telefax No. 086-214-4221
______________________________________________________________________________
loans, and conventional loans, it can be more challenging to procure financing for an
investment property.
5. Implications -If an investor collects rent from an investment property, the Internal
Revenue Service (IRS) requires them to report the rent as income, but the agency also
allows them to subtract relevant expenses from this amount.
Commercial Banking
 A commercial bank is a financial intermediary that provides liquidity by bridging
sources of capital from depositors and creating credit that can be extended to borrowers.
 Functions of a commercial bank include deposit acceptance, credit creation, treasury and
payments, and other agency and advisory services.
Savings and Mortgage Banking
 Another source of credit are savings and loan association which may be described as
"that corporation engaged in the business of accumulating savings of their members as
stockholders, and using such accumulations, together with their capital in the case of
stock corporations, for loans and/or investments in the securities of productive enterprises
or in securities of the Government, or any of its political subdivisions, instrumentalities
or corporations.
Telefax No. 086-214-4221
______________________________________________________________________________
Rural banks
 were established to service the unbanked and are strategically located in far-flung and
rural areas of a country. These banks have years of experience serving the underserved
sectors like small businesses, farmers, fishermen and remote communities.
 It is part of the sources of credit because the primary objective of rural banks is to meet
the credit needs of farmers and fishermen as well as of cooperatives and merchants in
rural areas.
REFFERENCES:
https://weforum.org/agenda/2023/02/rural-banks-can-accelerate-financial-inclusion-in-
southeast-asia/?
fbclid=IwAR28LsZ8dHjyn_kru52D8XBUuYCtbFD6ZhAqTrpkVx1TKoVlVyRYy207gC0#
:~:text=Rural%20banks%20were%20established%20to,farmers%2C%20fishermen
%20and%20remote%20communities
https://www.investopedia.com/terms/f/financialinstitution.asp
https://l.messenger.com/l.php?u=https%3A%2F%2Fefinancemanagement.com
%2Fworking-capital-financing%2Fsources-of-credit&h=AT0U-EklShE-JY4L88La-
6eL2wKyoTqogkm6yHhaF_1owwPD6rjM35RTQs4Qeu6RvDualo0qjpUbcmibc7kvhPtmjZ
nNCAJo1KtbcKH_RIwsQLCDaEWNRC-3cgxrwhIrCMIzng
https://l.messenger.com/l.php?u=https%3A%2F%2Fwww.investopedia.com%2Fterms%2Fi
%2Finvestment-property.asp&h=AT0U-EklShE-JY4L88La-
Telefax No. 086-214-4221
______________________________________________________________________________
6eL2wKyoTqogkm6yHhaF_1owwPD6rjM35RTQs4Qeu6RvDualo0qjpUbcmibc7kvhPtmjZnNC
AJo1KtbcKH_RIwsQLCDaEWNRC-3cgxrwhIrCMIzng
https://l.messenger.com/l.php?u=https%3A%2F%2Fcorporatefinanceinstitute.com%2Fresources
%2Fcommercial-lending%2Fcommercial-bank%2F&h=AT0U-EklShE-JY4L88La-
6eL2wKyoTqogkm6yHhaF_1owwPD6rjM35RTQs4Qeu6RvDualo0qjpUbcmibc7kvhPtmjZnNC
AJo1KtbcKH_RIwsQLCDaEWNRC-3cgxrwhIrCMIzng
TOPIC II
Telefax No. 086-214-4221
______________________________________________________________________________
OTHER SOURCES OF CREDIT
Individual Money Lenders
 One of the sources of credit is the individual money lender who may lend his
surplus to those in need, so that it will bring some income to him. However, since
in many cases no collateral is required on the part of the borrowers to secure the
loan of whatever sum of money; this money lender may be constrained to collect
a very high rate of interest over and above the legal one in order to protect his
personal interest and thus become what is known as a “loan shark.” Neither are
borrowers required to execute promissory notes.
Commercial Establishments
Retail Stores
 The biggest source of merchandise credit in the Philippines, also known as“sari-
sari”store.
 These stores cater to the everyday needs of the consumers.
-In accordance with the provisions of theRetail Trade Nationalization Lawon May
15, 1954, no alien is permitted to engage in this type of business.
Grocery and Department Stores

Telefax No. 086-214-4221
______________________________________________________________________________
 More sophisticated, grocery and department stores are two examples of retailing
establishments.
 Grocery stores are essentially food stores.
 Department stores, displays goods for the customer to inspect and pick out
whatever they want to buy and have them checked out through the cashier.
 Grocery stores, as well as department stores, generally carry well-known brands
of products they sell to consumers in efforts to enlist their patronage.
 Moreover, as an added inducement, the customers are given the privilege of
buying goods on credit which is generally facilitated by the use of credit cards.
Supermarkets
 The one major benefit that supermarkets offer to shoppers is that they can buy
almost everything under a single roof.
 The reason is that they are like one big catalog where the shopper can inspect
and study any of the thousands of items on display and budget her buying as
she goes through the store.
 She can examine a brand without anybody watching her, place it on her
shopping basket or push cart, return it to the shelf, or, she can examine
another brand, choose it or reject it to her heart’s content.
 Its chief features consist of assembling all kinds of goods including non-food
items, clothing, shoes, hardware and countless others. Fundamentally, a

Telefax No. 086-214-4221
______________________________________________________________________________
supermarket sells good to their customers on credit who qualify for the use of
such privilege.
Pawnshops
 The present-day pawnshops owe their origin from the Montes Pietatis which were
established by Franciscans (Friar Minor as they were invariably called) in Italy.
The terms mons referred to any form of capital accumulation, and pietatis from
the Latin “pietas” meaning pious.
 Considered as the oldest credit institution in China, according to a Harvard
professor of Chinese history.
 In the Philippines, pawnbroking is also one of the oldest credit institutions and is
believed to have been introduced by the Spanish friars.
 In this connection, the oldest savings bank, the Monte de Piedad, was granted the
privilege of lending money against pledges of jewelry.
 The rate of interest that any pawnshop shall collect shall not be any higher or
greater sum or value for any loan or forbearance than the rate allowed by the
Usury Law as amended.
Insurance Companies
Telefax No. 086-214-4221
______________________________________________________________________________
 The business of insurance companies is to enter into insurance contracts with
those who wish to provide for such contingencies as death or fire. Insurance
companies must accumulate premiums to build up funds to meet policy claims,
and they must meanwhile employ these funds in loans and investments.
Savings and loan Associations
 Another source of credit are savings and loan associations which ay described
as “that corporation engaged in the business of accumulating their members as
stockholders and using such accumulations, together with their capital in the
case of stock corporations, for loans and/or investments in the securities of
productive enterprise or in securities of the Government, or any of its political
subdivisions, instrumentalities or corporations.
Government financing Institutions
 Government Financing Institutions
-Government Services Insurance System (GSIS)- provides social security
coverage to employees in the public sector
- Social Security System (SSS)
International Organizations
Telefax No. 086-214-4221
______________________________________________________________________________
 One particular class of credit is known as public credit, that is, one government
borrowing from another, as for instance, the municipal government obtaining
loans form the national government or from the Central bank to finance the
construction of a public market or school building.
 World Bank
 International Monetary Fund which is designed to promote exchange stability
and assist in the establishment of multilateral system of payments in respect to
current transactions.
 Asian Development Bank intended purposely to generate growth and
cooperation in Asia.
 Export-Import Bank of the United States which acts as its principal lending arm
with respect to its foreign trade.
REFFERENCES
https://l.messenger.com/l.php?u=https%3A%2F%2Fwww.scribd.com%2Fdocument
%2F444207092%2FSource-of-Credit&h=AT0U-EklShE-JY4L88La-
https://l.messenger.com/l.php?u=https%3A%2F%2Fwww.britannica.com%2Fmoney
%2Fsavings-and-loan-association&h=AT0U-EklShE-JY4L88La-
Telefax No. 086-214-4221
______________________________________________________________________________
TOPIC III
MAJOR DOCUMENTS USED IN CREDIT TRANSACTIONS

Telefax No. 086-214-4221
______________________________________________________________________________
Objective: To familiarize the different credit instruments used in business transactions.
Introduction
- An acceptance is in the form of a draft, that is, an order drawn by one person upon a
bank or another party directing it to pay a stated sum of money either to the drawer or
to some third person.
Bank draft - It is drawn by a bank upon another bank.
Bank money order - the order is drawn by a bank on another bank to pay specified payee.
Bank Acceptance - It is like trade acceptance except that the order to pay.
Credit Card - the holders can purchase goods and services on credit card against
payment on the future.
Checks - It is a written and signed order of a depositor upon a bank to pay on demand.
Checking Deposit- A major portion of the money supply of countries, especially those
with advanced economies.
Negotiable Credit-Instruments Most credit instruments, especially checks.
Assignability- The characteristics of negotiability have been given only to
checks. Endorsement - When a person signs his name, with or without
qualifications.
Types of Endorsement:
Telefax No. 086-214-4221
______________________________________________________________________________
Special endorsement. - It specifies the name of the person to be paid.
Blank endorsement. - In this case, the instrument was drawn against no specified payee.
Restricted endorsement- It confines the endorsement to a specific purpose.
Conditional endorsement -It requires payment of the check under specified condition.
Qualified endorsement. -It limits the liability of the endorser by writing the words
“without recourse”.
Facultative endorsement. -A type of endorsement which uses discretion to forego
certain rights guaranteed by law but are waivable.
Presentment -Holders of credit instruments, such as checks and matured notes.
What is a CREDIT INSTRUMENT?
- It is a document which gives evidence of a credit obligation resulting from a past
transaction w/c set forth the responsibility of the debtor to his creditor.
Examples of credit instrument are:
 Ordinary IOUs
 Checks
CLASSES OF CREDIT INSTRUMENTS

Telefax No. 086-214-4221
______________________________________________________________________________
A. INVESTMENT CREDIT INSTRUMENT - financial instrument used by business
organizations for the purchase of fixed assets.
1. BONDS- are promises to pay the principal as well as interest to its holders at a certain
specified time indicated in the instrument.
2. SHORT TERM NOTES- are in a number of respects, may appear similar to bonds.
3. STOCKS - represents permanently invested capital of corporation contributed by the
owners termed as stockholders w/c are evidence by certificates.
Types of Stocks:
1. COMMON STOCK- the holder of common stock is the residual claimant, receiving only that
portion of the corporate income which remains after all other all claimants have been satisfied.
2. PREFERRED STOCKS - may be preferred as to assets or as to dividends or both.
COMPARISON OF COMMON AND PREFFERED STOCK
COMMON
1. Holder has limited interest corporate assets and Profits.
2. Holders share individual after the preferred stockholders' right have been satisfied.
3. Holders participate in the distribution of assets after prior claims have been met.
4. Holders have voting rights that permit them to elect the board of directors, hence to
participate in management.
Telefax No. 086-214-4221
______________________________________________________________________________
5. Unlimited dividend earnings which may be declared by the board of directors; hence to
participate in management-
PREFERRED
1.Holders have more security, less speculative than common stock.
2. Holders have rights to common stockholders. Moreover, they receive dividends before
common stockholders.
3. Have the right to share in the distribution of assets upon dissolution before common stock.
4. Frequently non-voting.
5. Dividends are generally fixed; from 5%to 8% per share
B. COMMERCIAL CREDIT INSTRUMENT - evidences the existence of certain
commercial transactions but, moreover, in the case of checks, they function to some extent as
near substitute for money.
Types of COMMERCIAL CREDIT INSTRUMENT:
1. PROMISES TO PAY
Telefax No. 086-214-4221
______________________________________________________________________________
A. OPEN BOOK ACCOUNTS/ BOOK ACCOUNT - one of the oldest forms of credit
instruments whereby an entry in the retailer’s books is made, debiting the customer with the
amount involved.
Dr: Accounts Receivable- Angel Locsin 3,000
Cr: Sales 3,000
B. BANK DEPOSIT- when a depositor exchanges his funds for the bank’s promise to pay,
either on demand or upon previous advance notice as in the case of time deposits.
C. PROMISSORY NOTE- a written promise by a person (the maker) to another party (the
payee) to paya definite sum of money at a certain future time.
Elements of a promissory note:
a. A promise to pay.
b. Definite sum of money
c. Future date
2. ORDERS TO PAY
Three (3) Parties involved in an “order to pay.”
1. DRAWER- party ordering that payment be made
2. DRAWEE- party ordered to make payment
3. PAYEE- party to whom payment is to be made

Telefax No. 086-214-4221
______________________________________________________________________________
A. CHECK- written order drawn by a depositor (the drawer) upon a bank (the drawee) to
pay on demand or at future determinable time sum of money to order or bearer (the
payee).
Kinds of Check:
1. OPEN CHECK – this check does not require presentation through a payee’s banking
account. It can either be payable to order or bearer. It has a current date on its face and
can be in cash on demand.
2. CROSSED CHECK – it has two parallel lines on the left corner. It must be presented
through a payee’s banking account for deposit. Can be payable to order or bearer.
3. CERTIFIED CHECK- the word “certified” or “good for payable” is stamped on its
face representing an assurance that the fund to cover the check will be sufficient.
4. MANAGER’S CHECK/CASHIER’S CHECK - checks issued by banks against their
account.
5. TRAVELER’S CHECK - purchased by individuals before leaving for a trip outside
the country.
6. OVERDRAFT CHECK- also known as “DRAWN AGAINST INSUFICIENT
FUNDS” CHECK. A check drawn against “no sufficient fund” checking account of
the depositor.
7. BOUNCING CHECK- A check drawn against “no fund”.

Telefax No. 086-214-4221
______________________________________________________________________________
8. STALE-DATED CHECK- this is where date on its face and date on encashment
exceeds six months. Banks dishonor this kind of check to protect the interest of the
depositor.
9. POST DATED CHECK- this is where the date on the face of the check is a future
date considering the day of encashment or payment.
10. STALE CHECK-a check becomes stale when it remains outstanding for 6 months.
11. COUNTER CHECK- a blank check available at a bank and usually to be cashed only at
the bank by the person writing the check.
12. VOUCHER CHECK- these are checks with an accompanying voucher for purposes
of keeping an accurate record of the amounts and purpose for which the checks have
been received.
ADVANTAGES OF CHECKS
1. Safety and Convenience
2. Stop Payment
3. Odd Amounts
4. Serves as receipt or proof of payment.
5. Eliminates risks and dangers involving large amounts of money
DISADVANTAGES OF CHECKS
Telefax No. 086-214-4221
______________________________________________________________________________
1. It is not accepted by the public to pay small amounts using checks.
2. It cannot be used in transactions involving the immediate delivery of goods between
people who do not know one another, as purchases in retail stores.
3. Checks are not legal tender.
Other Important Documents
1. Letter of Credit. -A letter of credit may be described as a letter issued by a
bank authorizing.
2. Bill of Lading. - It is a written account of goods shipped by any person, signed by
the agent of the owner of the vessel or by its matter.
3. Three important purposes are served by a bill of lading, such as:
a. It conveys title to the merchandise.
b. It is a receipt of acknowledgment of the goods signed by the carrier.
c. It serves as a contract of transportation between the shipper and the carrier.
4. Trust Receipt. - It is a document that is frequently used to protect the bank when it
becomes necessary.
5. Warehouse Receipts. - It is a written acknowledgment by a warehouseman that he
holds the certain goods, identified by the receipt, for the person to whom the writing is
issued; also, a contract by which the warehouseman agrees to deliver the goods to the
holder.
6. Mortgage - (From the Latin word “mortus” meaning dead and “vas” signifying a
Telefax No. 086-214-4221
______________________________________________________________________________
pledge) and the Old French mortgage, literally a death gage or pledge is a conveyance
of property as security debt, which is lost or becomes dead to the debtor if the money
or the interest due and not paid on a certain day.
Requirements of Negotiable Instruments
The paper which contains in writing the obligation of the debtor and the right of the creditor.
Bill of exchange. It is an unconditional signed written order addressed by one person to
another to pay on demand or at a specified future date a certain sum of money to the
order or bearer.
Kinds of Bill of Exchange:
a. Foreign bill
b. Domestic bill or inland
Evidence of Indebtedness
It refers to a bond, note or any written underwriting of a promise to pay on a public
debt. The certificate must be transferred in the name of the purchaser/buyer and physically
delivered to the purchaser/buyer or to his designated BSP-accredited third-party custodian.
There are three (3) classification for evidence of indebtedness namely:
1. Money Market,
2. Bonds,
3. Long-Term Note
REFERENCES:
Telefax No. 086-214-4221
______________________________________________________________________________
FM6-MIDTERM-WRITTEN-WORKS.pdf
https://www.scribd.com/document/65302780/Chapter-IX-Credit-Instrument?
fbclid=IwAR0yVYtq45ZEmjiBzwnlNds47NsorA3mW6X9dJMXb1G9NhYYG9nmw549N0c

Written Report Surenaaaaaa

Uploaded by

Copyright:

Available Formats

You might also like

Written Report Surenaaaaaa

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Written Report Surenaaaaaa

Uploaded by

Copyright:

Available Formats

Republic of the Philippines

North Eastern Mindanao State University

COLLEGE OF BUSINESS AND MANAGEMENT

Department of Business Management

A Written Report on: Credit and Collection

HILO, Kristine May A.

MAQUILING, Prescious Ann M.

POLINAR, Asis James S.

Dr. Floresito D. Calub

3FMA MTh 7:30-9:00am

Businesses are in regular need of credit as funds are always scarce.

payment amount, and how much the credit will cost.

Open-end (revolving)- open-end, or revolving credit, loans are made on a continuous

or overdraft protection are examples of open-end credit.

Financial intermediaries -serve as middlemen for financial transactions, generally

not accept deposits from the public.

transactions such as deposits, loans, investments, and currency exchange. Financial

 Financial institutions vary by size, scope, and geography.

income, the future resale of the property, or both

 Properties can represent a short- or long-term investment opportunity.

harder for investors to secure financing.

can have tax implications for investors.

 Types of investment Property

collect monthly rents.

2. Commercial income -generating properties don't always have to be residential. Some

investors—especially corporations—purchase commercial properties that are used

specifically for business purposes.

3. Mixed-Use - a mixed-use property can be used simultaneously for both commercial

structure houses residential units.

allows them to subtract relevant expenses from this amount.

 A commercial bank is a financial intermediary that provides liquidity by bridging

payments, and other agency and advisory services.

Savings and Mortgage Banking

"that corporation engaged in the business of accumulating savings of their members as

or in securities of the Government, or any of its political subdivisions, instrumentalities

sectors like small businesses, farmers, fishermen and remote communities.

Individual Money Lenders

borrowers required to execute promissory notes.

 These stores cater to the everyday needs of the consumers.

15, 1954, no alien is permitted to engage in this type of business.

Grocery and Department Stores

 Grocery stores are essentially food stores.

 Grocery stores, as well as department stores, generally carry well-known brands

of products they sell to consumers in efforts to enlist their patronage.

 Moreover, as an added inducement, the customers are given the privilege of

almost everything under a single roof.

she goes through the store.

another brand, choose it or reject it to her heart’s content.

items, clothing, shoes, hardware and countless others. Fundamentally, a

established by Franciscans (Friar Minor as they were invariably called) in Italy.

the Latin “pietas” meaning pious.

 Considered as the oldest credit institution in China, according to a Harvard

professor of Chinese history.

believed to have been introduced by the Spanish friars.

privilege of lending money against pledges of jewelry.

Usury Law as amended.

companies must accumulate premiums to build up funds to meet policy claims,