BUSI 1003 Chapter Notes - Chapter 6: Income Statement, Standard Accounting Practice, Retained Earnings
1 May 2014
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Receivables - result from sales on account. Includes all money claims against other entities including people, companies, and other organizations. Receivables are usually a significant portion of the total current assets. Accounts receivable - selling merchandise or services on account. It is recorded as an increase in accounts receivable. Normally collected in a short period like 30 days. Notes receivable - amounts that customers owe for which a formal, written instrument of credit has been issued (loan). If note is expected to be collected within a year it is recorded as a current asset. Advantages: by signing a note the debtor recognizes the debt and agrees to pay it according to its terms. Thus, a note is a stronger legal claim. Promissory note receivable - a written promise to pay the face amount usually, with interest, on demand or at a later date in the future. The maker is the party making the promise to pay.
