Audit_of_Receivables - 1 2nd Flr, GF Partners Bldg, 139...

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2 nd Flr, GF Partners Bldg, 139 H.V. dela Costa, Salcedo Village, Makati City AUDITING PROBLEMS Audit of Receivables                 Prof.    L.O. Aristorenas                                                                                                                                                       __                               _______     GAAP ON RECEIVABLES DEFINITION: Receivables refer to claims against others for money, goods or services arising from  sale of merchandise or money lent or the performance of services.  For accounting purposes  however, the term is employed to mean claims expected to be settled by the receipts of cash. RECOGNITION: Receivables are recognized when title to the goods passes to the buyer or when transfer  of resources take place.  The point at which title passes may vary with the terms of the sales. MEASUREMENT: 1. At face value 2. At discounted amount (present value) VALUATION: 1. Receivable are valued at their net realizable value or their expected  cash value.  Determination of NRV requires estimation of uncollectible receivables, as  such, an allowance account should be set up for doubtful accounts and for any  anticipated adjustments which in the normal course of the business will reduce  the amount receivable. Net realizable value  - is   the   estimated   amount   of   cash   that   will   be  collected or realized from receivables. 2. Long   term   note   receivables   should   be   valued   at   an   amount  representing the present value of the expected future cash receipts. 3. Receivable   denominated   in   foreign   currency   should   be   translated   to   local  currency at the exchange rate on balance sheet date. CLASSIFICATION: 1. Current Assets vs. Non Current Current -  receivables which are expected to be realized cash within the  normal operating cycle or one year, whichever is longer. Non current -  receivables which are expected to be realized beyond one year  or those receivables which are not currently collectible. 2. Trade vs. Non-trade 1
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Trade receivable   -  refers to claims arising from credit sale of merchandise  or services in the ordinary course of the  business.  The usual  type of trade receivables are: a.  Accounts receivable  -  short term, unsecured and informal       credit arrangements (open accounts). b.  Notes receivable
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Audit_of_Receivables - 1 2nd Flr, GF Partners Bldg, 139...

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