Ch. 8 Reporting and Analyzing Receivables

  1. Receivables
    • Amounts due from individuals and companies that are expected to be
    • collected in cash.
  2. Accounts Receivable
    Amounts customers owe on account.

    • Companies generally expect to collect accounts receivable within 30 to
    • 60 days. They are usually the most significant type of claim held by a
    • company.
  3. Notes Receivable
    • Claims for which formal instruments of credit are issued as evidence of
    • the debt.

    • The credit instrument normally requires the debtor to pay interest and
    • extends for time periods of 60–90 days or longer.
  4. Trade Receivables
    Notes and accounts receivable that result from sales transactions.
  5. Other Receivables
    • Other receivables include
    • non-trade receivables such as interest receivable, loans to company
    • officers, advances to employees, and income taxes refundable. These do
    • not generally result from the operations of the business. Therefore,
    • they are generally classified and reported as separate items in the
    • balance sheet.
  6. Allowance Method
    • A method of accounting for bad debts that involves estimating
    • uncollectible accounts at the end of each period.
  7. (Notes Receivable) Promissory Notes
    • A written promise to pay a specified amount of money on demand or at a
    • definite time.

    • Promissory notes may be used (1) when individuals and companies lend or
    • borrow money, (2) when the amount of the transaction and the credit
    • period exceed normal limits, and (3) in settlement of accounts
    • receivable.
Card Set
Ch. 8 Reporting and Analyzing Receivables
Ch. 8 Reporting and Analyzing Receivables terms and definitions