RECEIVABLES=ar eCol

lect
ibl
esandtheseari
sesnor
mal
lyf
rom credi
t
sal
es howev er t
her
e are some coll
ect
ibl
es fr
om ot
her busi
ness
tr
ansacti
ons.

Receivabl
es–Tr
ade.Gener
all
y,Tr
adeRecei
vabl
esar
ecl
assi
fi
edas
cur
rentassets.

Recei
vabl
es– Non-Tr adecouldbeeitherCur
rentornon-cur
rent
dependingonthecreditperi
od.I
fthecredi
tperi
odi
swithi
noneyearthen,
i
twillbeclassi
fi
edasCur rentAsset
sifmorethanoneyeart
henitwil
lbe
cl
assifi
edasnon-curr
entassets.

TwomostcommonRecei vableaccount:
AccountsReceiv
able=openaccount=l essf
ormalandev
idencedby
aChargeInvoi
ce.
NotesReceivabl
e=t hisformalsi
ncei
tisevi
dencedbyapromissor
y
not
erecei
v edfr
om debtor(customers)
.

APROMI SSORYNOTE=i tisawrit

tenpr
omisetopay
,asum cer
tai
nata
speci
fi
cf ut
uredat
eandsignedbythemar
ker.

Account
sRecei
vabl
e

Beg.Bal
. Col
lect
ions
Credi
tSal
es Sal
esDiscount
Sal
esReturns&Al
low
Wri
teoff
Recov
eryofpr
eviousl
y
Wri
tt
enoffaccts.
Endi
ngBal
ance

Met
hodsi
ncomput
ingf
ort
hepr
ovi
sionofBadDebt
s(Doubt
fulaccount
s)

a.Asper centageofSal
es=resul
tbecomest het
emporar
y
provisi
onforBD
b.Asper cent
ageofAcctsRec.=resul
tbecomestheendi
ng
balanceoftheAll
owanceforDoubtf
ulAccount
s
 c.Basedont
heAgingofRecei
vabl
e=-resulti
ssimi
lart
olet
ter“
b”
Al
lowanceforDoubt
fulAccounts

Beg.Balance
Wr
it
eof
f Provi
sionforBD
Recoveryofprevi
ousl
y
Wri
ttenoffaccount
s
End.Bal
ance

Met
hodsi
nnegot
iat
ingr
ecei
vabl
es=f
ort
hepur
poseofsecur
ingneeded
f
unds:

a.AssignmentofReceivabl
es
b.Pledgi
ngofReceiv
ables=Receivabl
esbecomethecol
lat
eralt
oa
l
oan
c.Factor
ingofRecei
vables=sel
li
ngofrecei
vabl
es

Withrecourse=t hepersonwhonegot i
atedther eceivabl
eis
l
iablein
theeventthattheborrower/
cust
omerf ail
stopayhi s
account.
Withoutrecour
se=t hepersonwhonegot i
atedt hereceiv
ableis
NOT
LI
ABLEint heeventthatthebor
rower /
cust omerfail
sto
payhi s
account.

Ter
msofSal
es:

2/10=numerator(2)i
sthedi scountpercent;denominat
or(10)no.of
day
s
n/30=nodiscountbutthecreditperi
odi s30day s
eom =EndofMont h.
FOBDesti
nati
on=t hetit
leoft hegoodsar etransf
err
edtothebuyer
att
he
t
imewhent hebuy eractual
lyreceivedthegoods.
 FOBShi
ppi
ngpoi
nt–thet
it
leofthegoodsaret
ransfer
redt
othe
buy
erat
theti
meofshi
pmentofgoodsbythesel
ler
.