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Receivables/Plant Assets

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Identify the different types of receivables

Describe the methods used to account for bad debts

Explain the concept of depreciation.

Describe methods for evaluating the use of plant assets

Indicate how long-lived assets are reported on the balance sheet

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Identify the different types of receivables

Receivables arise when goods are services are provided on credit. Different types of receivables are
1. Accounts Receivables - These arise in the normal course of trade when goods or services are sold on credit
2. Notes Receivables - In note receivables, the buyer also signs a note which is an evidence of debt. Thus an accounts receivable may become a note receivable upon the buyer signing the note
3. Other receivables - There are non-trade receivables such as interest receivable, advances or loans to employees, income tax refund receivable etc.

Describe the methods used to account for bad debts

There are two methods to account for bad debts -
1. The allowance method: In this method an estimate is made of the value of receivables that would not be collected and an allowance is created in the same period in which the sales are recorded. The allowance amount may be estimated using either percentage of credit sales or percentage of receivables. This ...

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