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.
1. FASB ASC 310-10-55-13 to 55-15
2. FAS ASC 310-10-0504
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.
Notes receivable are written promises to pay a certain amount of money on a specified future date.
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