Receivables
Topic: RECEIVABLES
I. DEFINITION
These represent amounts collectible from customers and others, most frequently arising from sales of merchandise, claims for money lent, or the performance of service. They may be interest bearing, collateralized, or billed.
II. COMPOSITION
A. Trade
1. Accounts Receivable 2. Notes Receivable
B. Non-Trade
1. Advances to Officers and Employees, Affiliates and Others 2. Claims against Suppliers and Insurance Companies 3. Those arising from non-recurring transactions (i.e., Subscriptions Receivable) and disposal of property 4. Accruals
III. VALUATION
A. General Rule
1. Face Value
B. Exception
1. Net Realizable Value (i.e., Face Value less Allowances for Doubtful Accounts*, Freight Charges, Sales Returns and Allowances and/ or Sales Discounts) 2. Discounted Amount or Present Value (i.e., long-term non-interest bearing note, and note carrying interest which is unreasonably low than the prevailing interest rate)
* Doubtful Accounts – are considered as administrative in nature, except if the selling manager has been granted the authority.
Methods of Estimating Doubtful Accounts: 1. Balance Sheet Approach – aging of accounts receivable, percentage of accounts receivable 2. Income Statement Approach – based on sales (gross or net, total or credit)
Methods of Accounting for Doubtful Accounts: 1. Allowance Method 2. Direct Write-Off Method
IV. FINANCIAL STATEMENT PRESENTATION
A. Current or Noncurrent -
1. Trade Receivables – within one year or normal operating cycle, whichever is longer (i.e., installment sales on household appliances and real estate where a major portion will be collected beyond normal operating cycle).
2. Non-Trade Receivables – within one year, notwithstanding the normal operating cycle.
B. Trade and Other Receivables – is
I. DEFINITION
These represent amounts collectible from customers and others, most frequently arising from sales of merchandise, claims for money lent, or the performance of service. They may be interest bearing, collateralized, or billed.
II. COMPOSITION
A. Trade
1. Accounts Receivable 2. Notes Receivable
B. Non-Trade
1. Advances to Officers and Employees, Affiliates and Others 2. Claims against Suppliers and Insurance Companies 3. Those arising from non-recurring transactions (i.e., Subscriptions Receivable) and disposal of property 4. Accruals
III. VALUATION
A. General Rule
1. Face Value
B. Exception
1. Net Realizable Value (i.e., Face Value less Allowances for Doubtful Accounts*, Freight Charges, Sales Returns and Allowances and/ or Sales Discounts) 2. Discounted Amount or Present Value (i.e., long-term non-interest bearing note, and note carrying interest which is unreasonably low than the prevailing interest rate)
* Doubtful Accounts – are considered as administrative in nature, except if the selling manager has been granted the authority.
Methods of Estimating Doubtful Accounts: 1. Balance Sheet Approach – aging of accounts receivable, percentage of accounts receivable 2. Income Statement Approach – based on sales (gross or net, total or credit)
Methods of Accounting for Doubtful Accounts: 1. Allowance Method 2. Direct Write-Off Method
IV. FINANCIAL STATEMENT PRESENTATION
A. Current or Noncurrent -
1. Trade Receivables – within one year or normal operating cycle, whichever is longer (i.e., installment sales on household appliances and real estate where a major portion will be collected beyond normal operating cycle).
2. Non-Trade Receivables – within one year, notwithstanding the normal operating cycle.
B. Trade and Other Receivables – is