Accounting for Receivables

Classification of Receivables

• Receivables represent amounts due from individuals and other companies.
• Accounts receivable: Specific amounts owed by customers on account, with expected collection occurring within approximately $30$ days.
• Notes receivable: Formal written instruments of credit for periods of $30$ days or longer; these are interest-bearing.

Recognition and Subsidiary Ledger

• Receivables are recognized when a service performance obligation is completed or goods are transferred and credit terms are granted.
• Individual customer accounts are tracked in a subsidiary accounts receivable ledger.
• Entries are posted individually to the subsidiary ledger and in summary form to the general ledger.

Special Transactions and Interest

• Credit card sales are treated as sales on account, whereas debit and bank credit card sales are recorded as cash sales.
• Interest revenue is recorded when a financing charge is applied to balances not paid in full within a specified timeframe.