Types of Receivables
The term receivables refers to amounts due from individuals and companies.
Receivables are claims that are expected to be collected in cash.
The management of receivables is a very important activity for any company that sells goods or services on credit.
Receivables are important because they represent one of a company’s most liquid assets. For many companies, receivables are also one of the largest assets.
The relative signifcance of a company’s receivables as a percentage of its assets depends on various factors: its industry, the time of year, whether it extends long-term financing, and its credit policies. To reflect important differences among receivables, they are frequently classifed as (1) accounts receivable, (2) notes receivable, and (3) other receivables
What are the different type of receivables?
Accounts receivable
Accounts receivable are amounts customers owe on account. They result from the sale of goods and services. Companies generally expect to collect accounts receivable within 30 to 60 days. They are usually the most signifcant type of claim held by a company.
Notes receivable
Notes receivable are a written promise (as evidenced by a formal instrument) for amounts to be received.
The note normally requires the collection of interest and extends for time periods of 60–90 days or longer.
Notes and accounts receivable that result from sales transactions are often called trade receivables.
Other receivables
Other receivables include nontrade 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.