what is recievable

 Hello friends ! how are you doing? let peace be with you😊 Today i brought to you a new topic concerning receivables, So, read it thoroughly.

#Receivables Defined

#👉Accounts Receivable
Accounts receivable are amounts that customers owe the company for normal credit purchases. Since accounts receivable are generally collected within two months of the sale, they are considered a current asset and usually appear on balance sheets below short-term investments and above inventory.

#👉Notes receivable
Are amounts owed to the company by customers or others who have signed
formal promissory notes in acknowledgment of their debts. Promissory notes strengthen a
company s legal claim against those who fail to pay as promised. The maturity date of a note determines whether it is placed with current assets or long-term assets on the balance sheet. Notes that are due in one year or less are considered current assets and notes that are due in more than one year are considered long-term assets.

Accounts receivable and notes receivable that result from company sales are called trade receivables, but there are other types of receivables as well. For example, interest revenue from notes or other interest-bearing assets is accrued at the end of each accounting period and placed in an account named interest receivable.

Wage advances, formal loans to employees, or loans to other companies create other types of receivables. If significant, these non trade receivables are
usually listed in separate categories on the balance sheet because each type of non trade receivable has distinct risk factors and liquidity characteristics.

Receivables of all types are normally reported on the balance sheet at their net realizable value which is the amount the company expects to receive in cash.

#Sales of Merchandise on account (sales on credit)

Most transactions involving individuals, businesses, and governments are not paid
for immediately, but are paid over a period of time on a credit basis. Credit can be defined as providing cash, goods or services in the present, with payment expected in the future. Credit sales are recorded by debiting an Accounts Receivable account for a specific customer and crediting the sales account.

To illustrate, assume that on March 23, 2020, ABC Company sold $500 worth of merchandize on account to XYZ Company. On March 26, XYZ returned $200 worth of the merchandize because of damage. The sale and the return are recorded in general journal form on the books of ABC as follows:

2020
March 23. A/R -XYZ Co.....500
                       Sales................500
(Recorded sales on account)
👉A/R stands for Accounts receivable
26. Sales return and Allo....200
                    A/R- XYZ Co.......200
(To record merchandize returned from a customer)
👉Allo stands for Allowance