Asked by Baylee Tullo on Jun 16, 2024
Verified
Discuss the similarities and differences between accounts receivable, notes receivable, and other receivables.
Notes Receivable
Financial claims against debtors documented through promissory notes that promise to pay the amount due with interest.
- Distinguish between accounts receivable, notes receivable, and other receivables.
Verified Answer
MK
Manoj KattelJun 16, 2024
Final Answer :
Accounts receivable result from the sale of goods and services on credit. They are normally collected within a short period of time (30-60 days) and are classified as current assets on the balance sheet.
Notes receivable can also result from the sale of goods, generally when the amount owed is due in more than 60 days. Notes can also be used to settle accounts receivable. Notes are formal written instruments of credit. When collection is expected to be in less than one year, they are classified as current assets on the balance sheet.
Other receivables result from non-trade transactions (interest, taxes, amounts due from employees). They are generally reported separately on the balance sheet. If collection is expected in less than one year, they are classified as current assets. If not, they are classified as investments.
Notes receivable can also result from the sale of goods, generally when the amount owed is due in more than 60 days. Notes can also be used to settle accounts receivable. Notes are formal written instruments of credit. When collection is expected to be in less than one year, they are classified as current assets on the balance sheet.
Other receivables result from non-trade transactions (interest, taxes, amounts due from employees). They are generally reported separately on the balance sheet. If collection is expected in less than one year, they are classified as current assets. If not, they are classified as investments.
Learning Objectives
- Distinguish between accounts receivable, notes receivable, and other receivables.
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