Question

What are the three classifications of receivables? Briefly explain about three classification of receivables

Answer 1

There are three categories for receivables:

1.Accounts Receivable: Amounts owing to a firm by customers or clients for products or services sold on credit Accounts receivable are normally generated by routine company activities and are expected to be recovered in a short period of time, typically 30 to 90 days.

2.Notes receivable are formal written pledges to pay a certain sum of money on a given future date. A written agreement or promissory note is usually required to back them up. Loans, credit sales with extended payment terms, and other contractual arrangements can all result in notes receivable.

3.Other Receivables: Receivables that do not come under accounts receivable or notes receivable are included in this category. It includes a wide range of assets, including employee advances, non-trade loans, and receivables from legal settlements or insurance claims. Other receivables are often less prevalent and may have distinguishing features or terms when compared to accounts and notes receivable.

 

 

 

 

 

 

 

 

 

 

 

These three categories of receivables aid businesses in managing various due sums, tracking them, and determining when and how likely they are to be collected.