Presented below are three receivables transactions. Indicate whether these receivables are reported as accounts receivable, notes receivable, or other receivables on a
balance sheet.
(a) Sold merchandise on account for $64,000 to a customer.
(b) Received a promissory note of $57,000 for services performed.
(c) Advanced $10,000 to an employee.
Answers
Answer:
Receivables:
In financial accounting, receivables refer to the financial assets that give a contractual right to receive cash on the part of the creditor or any other financial asset as agreed by the latter and the debtors.
Answer and Explanation:
To classify the transactions above as either accounts receivable, notes receivable, or other receivables on a balance sheet. Let us define first the three accounting terms.
Accounts Receivable - are open accounts that particularly arises from the normal course of business. It arises from the sales of goods or services in an on account basis.
Note receivable - a kind of receivable that is supported by a formal note from the debtor to pay liabilities at a specified period.
Other receivable - usually are those non-trade receivables like advances to or receivable from shareholder, employees and the likes.
Now, base on the definitions above, we can now classify each of the transactions.
Particulars => classification
(a) Advanced $10,000 to an => Other Receivables
employee.
(b) Received a promissory note
of $34,000 for services performed.=>Notes Receivable
(c) Sold merchandise on => Account receivable
account for $60,000 to a
customer.