Question

Explain the terms: 1) Tangible Assets 2) Trade Receivables and 3) Bad debts

Answer 1

Answer:

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. ... They are included in current assets except for maturities greater than 12 months after the statement of financial position date.

Explanation:

Trade receivables arise when a business makes sales or provides a service on credit. For example, if Ben sells goods on credit to Candar, Candar will take delivery of the goods and receive an invoice from Ben. This will state how much must be paid for the goods and the deadline for payment – for example, within 30 days. Ben now has a trade receivable – the amount payable to him by Candar.

The total value of trade receivables for a business at any one time represents the amount of sales which have not yet been paid for by customers. The trade receivables figure will depend on the following:

The value of credit sales. The greater the value of credit sales then, other things being equal, the greater the total of trade receivables.

The period of credit given. The longer the period of credit given to customers then, other things being equal, the greater the total of trade receivables.

The efficiency with which the business administers its trade receivables. The more inefficient the business is in billing its customers and collecting overdue accounts then, other things being equal, the greater the total of trade receivables.

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