Question: What is a receivable?

Answer: A receivable is a monetary claim against a business or an individual.

• A receivable is a right to receive cash in the

• future from a current transaction.

• - A creditor is the party who receives a

• receivable.

• - A debtor is the party to a credit transaction

• who is obligated to pay later

• Question: When does a receivable occur?

• Answer: A receivable occurs when a business sells goods or services to another party on account (on credit).

• Question: What does Accounts Receivable represent?

• Answer: • Accounts receivable, also called trade receivables, represents the right to receive cash in the future from customers for goods or services performed.

• - Generally collected within 30 to 60 days

• - Reported as a current asset on the balance

• sheet

• Question: What do notes receivable represent?

• Answer:

• Question: What does “others receivable” mean?

• Answer: Any other type of receivable is considered other receivables.

• • Receivables are classified as either current or long-term, depending on whether they will be received in one year or less. Examples include:

• • Dividends receivable

• • Interest receivable

• • Taxes receivable

• Question: Direct Write Off Method

• Answer: The direct write-off method of accounting for uncollectible receivables is primarily used by small, nonpublic companies.

• - Accounts receivable are written off when the

• business determines that it will never collect

• from a specific customer.

• - Bad debts expense is recorded.

• Question: Allowance Method

• Answer:

• Question: Percent of Sales Method

• Answer:

• Question: Aging of Receivables Method

• Answer: • The aging-of-receivables method is similar to the percent-of-receivables method.

• • In the aging method, businesses group individual accounts based on how long the receivable has been outstanding.

• • Different percentages are applied to each category

• Question: Recording Dishonored Notes Receivable

• Answer: • When a maker dishonors a note, the dishonored note and the unpaid interest are transferred to Accounts Receivable.

• • Later, the Accounts Receivable can be written off under the direct write-off method or the allowance method.