Receivables are right to receive cash in the short term within 1 accounting period end. Receivables are current asset of the entity. Receivables are recognized when:
- It is certain that economic benefits in the form of cash will flow to the entity.
- Sum of money involved is known reliably.
Like inventory, property, plant & equipment, development expenditure etc, receivables for never revalued. They are always recognized at cost according to IAS 39. Inventory & property, plant & equipment, development expenditure are non-financial asset. Receivables are financial asset and it does not have any external market, as $1 will always be $1.
Following are the common types of receivables.
1 Trade Receivables
Trade receivables arise due to sale on credit to customers.
2 Dividend Receivables
Dividend receivables arise due to investment in shares of other company and the company declares dividend.
3 Loan Receivables
Other receivables arise due to short term loan to supplier or employee or customer other than ordinary sale on credit.
4 Commission Receivables
Commission receivables arise due to sales of goods or services on consignment basis such as SIM card sold by franchises.
5 Account Receivables
All above receivables are collectively called as account receivables. Usually SFP contains sum of all receivables as account receivables and provides reference to break up given of account receivables in notes to the financial statements.
Account receivable also includes accrued income (goods or services or finance provided but cash no received until period end).