Ch. 8 Reporting and Analyzing Receivables
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- Amounts due from individuals and companies that are expected to be
- collected in cash.
Amounts customers owe on account.
- Companies generally expect to collect accounts receivable within 30 to
- 60 days. They are usually the most significant type of claim held by a
- Claims for which formal instruments of credit are issued as evidence of
- the debt.
- The credit instrument normally requires the debtor to pay interest and
- extends for time periods of 60–90 days or longer.
Notes and accounts receivable that result from sales transactions.
- Other receivables include
- non-trade 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.
- A method of accounting for bad debts that involves estimating
- uncollectible accounts at the end of each period.
(Notes Receivable) Promissory Notes
- A written promise to pay a specified amount of money on demand or at a
- definite time.
- Promissory notes may be used (1) when individuals and companies lend or
- borrow money, (2) when the amount of the transaction and the credit
- period exceed normal limits, and (3) in settlement of accounts
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