Trade accounts notes and other receivables
Receivables are amounts due to a company by its customers and others. Receivables can be broadly classified into trade-receivables and non-trade receivables.
Trade receivables are those receivables which originate from trade accounts notes and other receivables of goods and services by a business in the ordinary course of business. Non-trade receivables are the amounts due from third trade accounts notes and other receivables for transactions outside its primary course of business i.
Receivables are normally current assets but some may have a non-current depending on their maturity. Accounts receivable are current assets which represent amounts to be collected from trade accounts notes and other receivables for goods sold and services provided. When a company sells goods or provides services, the customers rarely makes payment on spot. Instead, they are trade accounts notes and other receivables to make payment within a certain time period, called credit period.
The terms that determine the due date and the discount available if payment is made by a certain date are called credit terms. When sales are made on credit, accounts receivable are created which are recorded through the following journal entry:. The accounts receivable balance is presented on balance sheet net of any allowance for doubtful accounts as follows. When cash is collected from customer, the accounts receivable balance on balance sheet is reduced through the following journal entry:.
Many companies allow customers certain cash discount when they make payment quickly. The cash discount depends on the credit terms. Note receivable are receivables supported by a written statement by the debtor to pay a specified sum on a specified date.
Like accounts receivable, notes receivable arise in the ordinary course of business; but unlike accounts receivable they are in written form. Notes receivable usually require the debtor to pay interest. They may be current and non-current. Testing was completed on 30 April and the software became operational. JT had to settle another large liability in April which resulted in it not being able to pay the remaining invoice amount i.
JT paid the interest and principal of the note receivable at its maturity. Conversion of accounts receivable to note receivable on 1 May is booked via the following journal entry:.
Temporary Regulations Related to Reporting of Bond Premium and Acquisition Premium Under the current information reporting rules, interest trade accounts notes and other receivables is reported to recipients. The employee can claim a deduction from taxable income equal to half this amount, if certain conditions are met.
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