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Accounts Receivable, SEC site, AR details for GE

Your company's accounts payable clerk is asked to fill in for your accounts receivable clerk. Many things look unfamiliar to her, and she needs some explanations. You start by saying, "Accounts receivable is claims from monies due to the company." Continue your explanation with the following:

Explain:
- the classification of receivables.
- how companies handle uncollectible accounts.
- revenue recognition when the right of return exists.

Visit the SEC's Web site (www.sec.gov), and then do the following:
- Review a sample of financial statements submitted by an SEC registrant.
- Include the URL in your post.

After reviewing the notes to the financial statements, list the types of information you found about the following:
- The type of accounts receivable the registrant had
- The classification
- How discounts are handled (if given)
- How the company treats uncollectible accounts

Solution Preview

Accounts receivable are amounts due the firm because a sale was made earlier but not paid yet. Accounts receivable, the listing of all unpaid invoices, is classified as a current asset. That is, it is something of value that the firm expects to convert to cash shortly (within a year but probably much sooner than that).

When the firm sells goods, the amount sold is reported as revenue. If the item sold may be returned, a reserve for potential returns is made just in case the sale "does not stick." This prevents overreporting of sales when the sales is just temporary (coming back from customer).

You can review accounts receivable by reviewing a balance sheet. For instance, you can see GE's 10K for 2011 at this site:

http://www.sec.gov/Archives/edgar/data/40545/000004054512000016/ge10k.htm

GE has two footnotes for receivables, one for the traditional "due next month" credit sale and another for the customers who will pay for their purchase monthly over a long period of time (including interest). The amounts for sales to customers who will pay over time are considered loans.

(see link to the financial statements for better formatting of tables)

NOTE 4. CURRENT RECEIVABLES

Consolidated(a) GE(b)
December 31 (In millions) 2011 2010 2011 2010

Energy Infrastructure $ 8,845 $ 7,377 $ 6,499 $ 5,349
Aviation 4,348 3,554 2,658 2,009
Healthcare 4,306 4,164 1,943 2,053
Transportation 441 440 347 440
Home & Business Solutions 1,493 1,426 243 240
Corporate items and eliminations 550 2,088 563 713
19,983 19,049 12,253 10,804
Less allowance for losses (452) (428) (446) ...

Solution Summary

Your tutorial is 972 words and includes a link to the SEC site to see GE's 10K for 2011. The two receivable footnotes are copied in full in the posting for your review. Six paragraphs of commentary discuss GE's receivables, estimate for uncollectible amounts, and discounts.

$2.19