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Receivables

In general, financing receivables (or simply receivables) are claims that a company has against customers and others for money, goods, or services. Receivables my arise from credit sales, loans, or other transactions. Financing receivables involve a contractual right to receive cash or other financial assets either on demand or on fixed or determinable dates. Financing receivable are recognized as assets on the company's financial statements, and may be in the form of loans, trade accounts receivable, notes receivable, credit cards, rights to lease payments on leases that are not operating leases, and other types of financial instruments. Although similar, securitized debt intruments (such as a government or corporate bond) are not considered to be receivables.1 

Financing receivables: Financing receivables are arrangements that represeten a contractual right to receive money on demand or on fixed or determinable dates, and, as well, are recognized as assets in the entity's statment of financial position. 

Current receivables are expected to be collected within a year or during the operating cycle, whichever is longer. All other receivables are classified as noncurrent. Receivables may be originated by an entity or purchased from another entity.2 

Trade receivable: Trade receivables are amounts owed by customers who the company has sold goods or delivered services to as part of its normal business operations. Trade receivables result from operating transactions. They can take the form of either accounts receivable or notes receivable.


Accounts receivable: Accounts receivable are short-term extensions of credit that are based on a purchaser's oral promise to pay for goods and services that have been sold. They are typically collected within 30-60 days, but this number can vary depending on the industry. 

Notes receivable: Notes receivable are written promises to pay a certain amount of money on a specified future date. They may arise both through the sale of goods and services, as well as from other transactions. Notes receivables may be both current and noncurrent (if they are going to be collected in more than a year, or more than the operating cycle of the business, whichever is longer).

Loan receivable: Loan receivables are created when one party advances cash or other assets to a borrower and receives a promise to be repaid later. Loans tend to result from financing transactions by borrowers and investing transactions by lenders. When there is a written contract that gives the terms and conditions of the loan receivable, the loan can also be called a notes receivable. 

Nontrade receivables: Nontrade receivables are created by a variety of transactions and can be written as either promises either to pay cash or to deliver other assets. Nontrade receivables include items such as advances to officers, employees and subsidiaries, amounts owing as a result of delayed payment terms on the sale of fixed assets, amounts receivable from the government, dividends and interest receivable, and insurance or elgal claims. 


References:

1. 
FASB ASC 310-10-55-13 to 55-15
2. FAS ASC 310-10-0504

Categories within Receivables

DSO and Current Receivables Balance

The Holland sofa company sells on terms of 3/10, net 30. Gross sales for the year are $1.2 million and the collection department estimates that 30 percent of customers pay on the 10th day and take discounts; 40 percent pay on the 30th day; and the remaining 30 percent pay; on average, 40 days after the purchase. Assume 365 day

Days' Receivables

For the last fiscal year, a clinic has patient revenues of $4,235,000 and accounts receivable of $1,225,000. How many days' receivables does this represent? Please provide: - Your answer in numerical terms - Narrative statement that explains how you calculated your answer - Original example/scenario that demonstrates your un

Receivables and Credit Cards

Valley Clothing Shop is a small clothing retailer now in its fourth year of business. Through its first year of operations, Valley has operated on a pure cash or check basis. Currently, Valley has averaged $275,000 of annual cash sales with an average profit margin of 40%. Lately, many customers have expressed frustration over t

Amount of Net Realizable Value of Receivables

Kentucky Supply Co., which has no beginning balance in its Accounts Receivable and Allowance for Doubtful Accounts, earned $80,000 of revenue on account during 2012. During 2012, the company collected $64,000 of cash from its receivables accounts. Kentucky estimates that will be unable to collect 2% of revenue on account. The am

Calculating Declining Receivables Example

Data on Shick Inc. for 2008 are shown below, along with the days sales outstanding of the firms against which it benchmarks. The firm's new CFO believes that the company could reduce its receivables enough to reduce its DSO to the benchmarks' average. If this were done, by how much would receivables decline? Use a 365-day yea

Cash and Receivables for Standard Medium Exchange

Cash, the most liquid of assets, is the standard medium of exchange and the basis for measuring and accounting for all other items. Discuss the management control issues related to cash. Discuss how cash and related items are reporting in the accounting records. Just a note on this for you all. You can focus on what type of in

Factors Influencing The Receivables Level

40. A company's investment in receivables is influenced by several variables, including: A. The level of sales. B. The nature of the product or service sold. C. The credit and collection policies. D. All of these are correct.

Loss on sale of receivables

Joe Novak Corporation factored, with recourse $100,000 of accounts receivable with Huskie financing. The finance charge is 3% and 5% was retained to cover sales discounts, sales returns, and sales allowances. Joe Novak estimates the recourse obligation at $2400. What amount should Joe Novak report as a loss on sale of receivable

Firm's Day in Receivables

For the year just ended, James' Drafting Supplies had average accounts receivable of $880,000 and total credit sales of $4,800,000. Throughout the year, a factor purchased accounts receivable from the firm at a 2% discount. What was the firm's day in receivables?

Cash collection from receivables

A company has completed its sales budget for the first quarter of 2005. projected credit sales for the first four months of the year are shown: January $30,000 February $36,000 March $45,000 April $48,000 The company's past records show collection of credit sales as follows: 30% in the month of sale and the balance in

Overstated Sales and Accounts Receivables

I have been working on the attached case study but I can not grasp the inherent risks on the selected transaction cycle. I just want background information so I can have a path to follow. Thanks.

Long-term receivables, preparing schedules - Connecticut Inc.

P7-10 (Comprehensive Receivables Problem) Connecticut Inc. had the following long-term receivable account balances at December 31, 2006. Note receivable from sale of division $1,800,000 Note receivable from officer 400,000 Transactions during 2007 and other information relating to Connecticut's long-term receivables wer

Calculating the Average Collection Period

Trying to find the receivable turnover, the day's sales in receivables, and how long it took on average for credit customers to pay off their accounts. current accounts receivable balance $387,615 credit sales for the year $2,945,600

Revenue and Receivables

The town of Marysville estimates that 5% of its property tax revenues are noncollectable. The town typically levies and collects all taxes within the tax year that the tax revenue is intended to benefit. For the fiscal year ended June 30, 2006, Marysville levied $2,000,000 in taxes and record what amounts as revenue and receiv

Receivables Investment & Cost of Trade Credit

Receivables Investment Medwig Corporation has a DSO of 17 days. The company averages $3,500 in credit sales each day. What is the company's average account receivable? Cost of Trade Credit What is the nominal and effective cost of trade credit under the credit terms of 3/15, net 30?

Working with Receivables

If a company had sales of $180,000 during the month of October, which also included $120,000 in credit sales. October collections were $90,000. Additional data: September 30th we will debit balance in Accounts Receivable for $28,000. September 30th we will credit balance in Allowance for Uncollectible Accounts, $1,000

Classifying Receivables

Below are various receivable transactions entered into by Lawson Tool Company. Indicate whether the receivables are reported as accounts receivable, notes receivable, or other receivables on the balance sheet. a. Advanced $1,000 to a trusted employee. b. Accepted a $2,000 promissory note from a customer as payment on account.

Receivables - Melanie Griffith Company

Melanie Griffith Company closes its books monthly. On September 30, selected ledger account balances are: Notes Receivable $28,000 Interest Receivable $ 216 Notes Receivable include the following.

Trade credit and receivables

Please help with the following problems. Please provide step by step calculations with explanations. A firm offers terms of 2/15,net 30. Currently, two-thirds of all customers take advantage of the trade discount; the remainder pay bills at the due date. A. What will be the firm's typical calue for its accounts recievab

Question about Trade Credit and Receivables

Trade Credit and Receivables. A firm offers terms of 2/15, net 30. Currently, two-thirds of all customers take advantage of the trade discount; the remainder pay bills at the due date. a. What will be the firm's typical value for its accounts receivable period? b. What is the average investment in accounts receivable if an