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Receivables

Receivables are financial assets that give one party the right to receive cash from another party. They include claims against customers, suppliers, employees, officers, and shareholders. Receivables are classified as either trade receivables from normal business operations like accounts receivable and notes receivable, or non-trade receivables from other activities like advances to subsidiaries. Current receivables are expected to be collected within one year or one normal operating cycle, whichever is longer, while non-current receivables are collected beyond one year. Receivables are initially recorded at their face value and subsequently at their net realizable value, and allowances are made for items like sales discounts, freight costs, returns, and doubtful

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34 views2 pages

Receivables

Receivables are financial assets that give one party the right to receive cash from another party. They include claims against customers, suppliers, employees, officers, and shareholders. Receivables are classified as either trade receivables from normal business operations like accounts receivable and notes receivable, or non-trade receivables from other activities like advances to subsidiaries. Current receivables are expected to be collected within one year or one normal operating cycle, whichever is longer, while non-current receivables are collected beyond one year. Receivables are initially recorded at their face value and subsequently at their net realizable value, and allowances are made for items like sales discounts, freight costs, returns, and doubtful

Uploaded by

Bryane
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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RECEIVABLES

I. DEFINITION
Financial asset gives right for one party to receive cash and obligation to another party.
Claims held against other party such as customers, supplier etc
Claims held against parties whin the entity employees, officers and shareholders

II. CLASIFFICATION
a. Trade arising from normal operating cycle (A/R, N/R)
b. Nontrade other than normal operating activities
a. Adavances to subisidiaries/affiliates
b. Advance to officers and shareholders
c. Seurity deposit
d. Accrued income (dividend, interest, rent)
e. Claim against:
Insurance companies for casulaties
Govenrment for tax refunds
Customers for returnable items
Suppliers for oerpayments
Defendants under suit
Carriers for damaged or lost goods

III. PRESENTATION

RECEIVABLES

Yes No
Arising from sales in the ordinary
course of business

Current Yes Collectible within one No


year

Current Non current

a. Current expected to realized within the normal operating cycle / one within, wichever is longer
b. Noncurrent collectible beyond one year

IV. MEASUREMENT
Initially face value/face amount
Subsequently net realizable value / recoverable value

V. ALLOWANCES
Sales discount
o Gross method A/R are measured at the gross amount
o Net A/R are recorded at gross amount less sales dicount
Freight
o FOB Shipping point/ Freight collect (buyer) Ownership is transferred upon shipment
o FOD Destination / Freight prepaid (seller) - ownership is transferred upon receipt of the buyer
Sale returns
Doubtful accounts
o Allowance method recognizes bad debts if collection is already doubtful
o Direct method - recognizes bad debts when the account is proved to be worthless

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