# Receivables: Types of Receivables, Calculation & Examples

In accounting, receivables are amounts owed to a company by customers or entities, representing the right to receive payment for goods or services. They are classified as assets on the balance sheet.

## What Are Receivables in Accounting?

Receivables are claims against customers and others for money, goods, or services. For financial statement purposes, companies classify receivables as either current (short-term) or noncurrent (long-term).

Companies expect to collect current receivables within a year or during the current operating cycle, whichever is longer.

They classify all other receivables as noncurrent. Receivables are further classified in the balance sheet as either trade or nontrade receivables.

A receivable is an amount due from customers for credit sales. Receivables are claims against customers and others for money, goods, or services.

The main sources of receivables are the normal operating activities of a business, i.e., credit sales of goods and services to customers.

## 3 Types of Receivables

Types of receivables are;

1. Current or non-current Receivables,
3. Accounts or notes Receivables.

## Current Receivables

Current Receivables are expected to be collected within a year or during the current operating cycle or accounting period.

Amounts due from officers, directors, and major stockholders arising out of sales and subject to the usual credit terms are normally considered current receivable.

In this example, the table includes columns for the customer’s name, the invoice amount, the payment terms (indicating when the payment is due), and the due date for each customer’s invoice. These are all components of current receivables, which represent the amounts owed by customers that are expected to be collected within a relatively short period, usually within one year.

## Non-current Receivables

Non-current Receivables (long-term) are expected to be collected for more than one or two years.

When claims have arisen from transactions other than sales and current recovery is not assured, such items are Non-current receivable.

In this example, the table includes columns for the borrower’s name or identifier, the principal amount of the loan, the interest rate applied to the loan, and the maturity date of each non-current receivable.

Non-current receivables represent amounts owed to the company that are not expected to be collected within a relatively short period, typically extending beyond one year.

These receivables can arise from long-term loans, installment sales, or other financial arrangements where payment is anticipated over an extended period of time.

The company keeps track of these receivables separately from current receivables to reflect their long-term nature and different collection timeline.

Trade Receivables are amounts owed by customers for goods sold and services rendered as part of normal business operations.

Normally trade receivables do not involve interest, although an interest or service charge may be added if payments are not made within a specified period.

1. Advances to officers, subsidiaries, and employees.
2. Deposits to cover potential damages or losses.
3. Dividends and interest receivable
4. Common carriers for damaged or lost goods.
5. Customers for returnable items.

In this example, the table includes columns for the customer’s name, the invoice amount, the payment terms (indicating when the payment is due), and the due date for each customer’s invoice.

These components represent trade receivables, which are the amounts owed to a company from its customers for the sale of goods or services on credit terms within the normal course of business.

Trade receivables are typically short-term in nature and are an important component of a company’s working capital. The company uses this table to track and manage the trade receivables, ensuring timely collection and monitoring the payment due dates from its customers.

Non-Trade Receivables arise from a variety of transactions and can be written promises either to pay or to deliver, for example-

1. Sales of securities or property other than .goods or
2. Advances to officers and employees.
3. Deposits to cover potential damages or
4. Common carriers for damaged or lost goods.

Certainly! Here’s an example table illustrating non-trade receivables:

In this example, the table includes columns for the debtor (the entity owing the money), the amount owed, and the due date for each non-trade receivable.

Non-trade receivables refer to amounts owed to a company that is not directly related to the sale of goods or services in the normal course of business. They can arise from various transactions such as loans provided to employees or external parties, rent deposits, or refunds from vendors.

These receivables are typically classified separately from trade receivables as they involve different types of transactions and may have different payment terms or conditions. The company uses this table to track and manage its non-trade receivables, ensuring timely collection and monitoring of the due dates for each debtor.

## Accounts Receivables

Accounts Receivables are oral promises of the purchases to pay for goods and services sold. They are normally collectible within 30 to 60 days.

In this example, the table includes columns for the customer’s name, the invoice amount, the payment terms (indicating when the payment is due), and the due date for each customer’s invoice. These components represent accounts receivable, which are the outstanding amounts owed to a company by its customers for goods or services provided on credit.

Accounts receivable reflect the credit sales made by the company and are typically short-term assets that are expected to be collected within a relatively short period, usually within one year.

The company uses this table to track and manage its accounts receivable, ensuring timely collection of outstanding payments and monitoring the due dates for each customer’s invoice.

## Notes Receivables

Notes Receivables are promises to pay a certain sum on a specified future date. They may arise from sales, financing, or other transactions. Notes may be short-term or long­term.

In this example, the table includes columns for the borrower’s name or identifier, the note’s principal amount, the interest rate applied to the note, and the maturity date of each note receivable.

Notes receivable represent formal written promises by borrowers to repay a specific amount of money to the lender at a future date. These notes can be issued for various reasons, such as loans provided by the company to other entities or individuals. They typically have specified interest rates and maturity dates, at this point, the borrower must repay the principal amount plus any accrued interest.

The company uses this table to track and manage its notes receivable, monitor the repayment schedule, calculate interest earned, and ensure the timely collection of principal and interest payments.

## Receivables Turnover Ratio

Analysts frequently compute financial ratios to evaluate a company’s accounts receivable liquidity. To assess the liquidity of the receivables, they use the receivables turnover ratio. This ratio measures the number of times, on average, a company.