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
Now assume that you have been asked how to account for the destroyed drilling operation in the Gulf Mexico in terms of the destroyed right and lost natural resources. Provide a rat

To finish this scenario, use the Confidence Interval Calculator Sheets 1,2,3 and the Area Gas Prices - Random Sample Excel file, linked in the Resources. The Minneapolis Star Tr

This time of year we all here about football. For me it is the bad news of how poorly the Buffalo Bills are performing. Hopefully your favorite team is doing well. One thing we all

In view of company being faced with huge write-downs to the carrying values of their intangible assets, what are the current AASB reporting requirements for intagibles and does the


A firm of manufactures, whose books are closed on 31st December, purchased machinery for Rs.50,000 on 15 January, 2010. Additional Machinery was acquired for Rs.10,000 on 1st July,

Balance sheet is related along with reporting the financial position of an entity on a specific point in time. Such position is conveyed in terms of listing all the things of value

Hello, I have a presentation about an assigned case study from the book and i also have the solution manual. I am extremely busy till the day of my presentation and my english lan

Fixed Assets These are tangible, relatively long-lived items owned through the business. The benefit of these assets is obtainable not only in the accounting period wherein the

Explain the procedure followed in government system of accounting in india