Accounts receivable, Accounting Standards

These are amounts owed to the company through debtors. This is the purpose why we also utilize the term sundry debtors to indicate the amounts owed to the firm. This signifies amounts generally arising out of normal commercial transactions. Or we can say, 'accounts receivable' or sundry debtors represent unpaid customer accounts. Inside the balance sheet explanations these represent amounts owed to the firm through customers on the balance sheet date. Such are also called as trade receivables, as they arise out of normal trading transactions. Trade receivables occur directly from credit sales and as provide significant information for management and outsiders. In most conditions these accounts are unsecured and contain only the personal security of the customer.

This is normal that several of these accounts default and turn into uncollectable. These collection losses are termed as bad debts. This is impossible for the management to identify exactly that accounts and what amount will not be collected. But, depends on past experience, this is possible for the management to estimate the loss on the sundry or receivable debtors like a whole. Such estimates decrease the gross value of accounts receivable to their estimated realizable value. For illustration:

Accounts Receivable                                                                                       7,50,000

Less: Estimated collection loss at 10%                                                             75,000

Net realisable value of accounts receivable                                                   6,75,000

The estimated collection loss is variously considered to as provision for uncertain debts, provision for bad provision or debts for collection losses.

This is a usual practice for debts to be evidenced by formal written promises to pay or acceptance of an order to pay. Such formal documentary debts represent Promissory Notes, Receivable or Bills Receivable. Such instruments used in trade are negotiable instruments and therefore allow the trader to assign any of his or her receivables to the other party or a bank for realizing immediate liquidity.

This is also usual for accounts receivables to be pledged or assigned mainly to banks against short-term credits in the type of cash credits or overdrafts.

Posted Date: 4/3/2013 6:35:07 AM | Location : United States

Related Discussions:- Accounts receivable, Assignment Help, Ask Question on Accounts receivable, Get Answer, Expert's Help, Accounts receivable Discussions

Write discussion on Accounts receivable
Your posts are moderated
Related Questions
Hello, I am interested in help on an ACCO 310 case which is due on Tuesday the 13th at 12 PM. Please contact me at your earliest convenience and hopefully we can work something ou


Along with a view to harmonise varying accounting policies and practices recently utilize in India, the Institute of Chartered Accountants of India (ICAI) created the Accounting St


During 2011, Lavina Corporation had cash and credit sales of $94,000 and $91,000, respectively. The company also collected accounts receivable of $53,400 and incurred expenses of

Formed under the Securities and Exchange Act of 1934 the SEC (Securities and Exchange Commission) is a government agency that administers important acts dealing with the interstate

last changes in accounting standard in aias?

Q. Explain accounting structure? The accounting structure of a profit seeking business is an information system designed to provide relevant financial information on the resour

i have an assignment that is requiring me to build my own Accounting framework. this assignment is not a research or textual assignment it must have a thinking process, so i can an