Accounting: The Basics of Receivables
In accounting, a receivable exists when the business has a claim to some money from another party.
The two parties to a receivable transaction are the creditor and debtor. The creditor is the party that will receive the cash from a receivable. The debtor is the party that will pay the money in the future.
Receivables are recorded as assets on the balance sheet. Accounts Receivable, Notes Receivable, and Other Receivables are the major categories of receivables.
Accounts receivable are claims on cash as payment for goods sold or services rendered. They are recorded with the current assets on the classified balance sheet.
A note receivable is the right to receive a specific amount of money plus interest at a specific time in the future. Notes receivable may be recorded with current or long-term assets on the balance sheet. A note receivable is considered a current asset when it is due within 12 months OR within the business' operating cycle.