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A. 3 Trade and Other Receivables

Trade receivables refer to claims arising from the sale of merchandise or services in the ordinary course of business, such as credit sales to customers. They are usually unsecured and due within 30-90 days. Non-trade receivables arise from other transactions and include advances to suppliers, employees, affiliates, as well as accrued income and subscriptions receivable if current. For retailers and manufacturers, receivables are classified as either trade or non-trade and listed as current assets if expected to be collected within a year.

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115 views1 page

A. 3 Trade and Other Receivables

Trade receivables refer to claims arising from the sale of merchandise or services in the ordinary course of business, such as credit sales to customers. They are usually unsecured and due within 30-90 days. Non-trade receivables arise from other transactions and include advances to suppliers, employees, affiliates, as well as accrued income and subscriptions receivable if current. For retailers and manufacturers, receivables are classified as either trade or non-trade and listed as current assets if expected to be collected within a year.

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shuzo
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TRADE AND OTHER RECEIVABLES

1. Receivables – financial assets that represent a contractual right to receive cash or


another financial asset from another entity.
- Recognized when and only when the entity becomes a party to the contractual
provisions of the instrument
- For retailers or manufacturers, receivables are classified into two: trade or non
– trade receivables

A. Trade Receivables – refers to claims arising from sale of merchandise or services


in the ordinary course of business.
 Result from normal operating activities such as credit sales of goods or
services to customers ( accounts receivable)
 Maybe evidenced by a financial written promise to pay (notes receivable)
 In most cases, they are unsecured, “open” accounts reflecting a short – term
extension of credit to a customer for a period of 30 – 90 days, with the
potential for interest charges if the account is not paid within such period
(installment receivable)
 If realizable within 1 year or normal operating cycle whichever is longer,
CURRENT ASSETS.

B. Non – trade Receivables – all other types of receivables; those that arise from
transactions other than sale of merchandise or services in the ordinary course of
business.
- If realizable within 1 year, CURRENT ASSETS.
 Advances to suppliers (debit in AP) – normally CA
 Advances to officers and employees – CA or NCA
 Advances to affiliates – long – term investment
 Receivables from sale of security or property other than
inventory – CA or NCA
 Accrued income (DR and IR) – normally CA
 Subscriptions receivable – if current CA; if not, deduction
from SHE
 Creditor’s account – debit balances – normally CA
 Special deposits on contract bids – normally NCA
 Claims receivables – normally CA

Note: For financial institutions, the current and noncurrent classification is not relevant.
Receivables are presented in order of liquidity.

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