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3/27/2016

How are You Classifying Your Receivables?

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The Receivables result in Sales

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The receivables that result from sales on account are normally accounts receivable or notes receivable.  The term receivables includes all money claims against other entities, including people, companies and other organizations.  Receivables are usually a significant portion of the total current assets.

​Notes receivable are amounts that customers owe for which a formal, written instrument of credit has been issued.  If notes receivable are expected to be collected within a year, they are classified on the balance sheet as current asset.  Notes are often used for credit periods of more than 60 days.  For example, an automobile dealer may require a down payment at the time of sales and accept a note or a series of notes for the remainder.  Such notes usually provide for monthly payments.

​Other receivables include interest receivable, taxes receivable, and receivables from officers or employees.  Other receivable are normally reported separately on the balance sheet.  If they are expected to be collected within one year, they are classified as current assets.
Source:  Corporate Financial Accounting 12E

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