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.