receivable

Receivable is a financial asset representing a claim to future cash. In business accounting, the term most often refers to accounts receivable—monies owed by customers for goods delivered or services performed. Receivables can also include non-trade items such as interest receivable, tax refunds, or employee advances. They are typically classified as current assets on the balance sheet when collection is expected within twelve months, though longer maturities may be shown as non-current receivables.

Recognition and measurement: Receivables are initially recognized at the transaction price. They are usually subsequently measured at amortized cost, unless they are held for trading or designated at fair value through profit or loss. The asset is tested for credit risk with an impairment allowance based on an expected credit loss model (ECL under IFRS 9; CECL under US GAAP).

Net realizable value and aging: The carrying amount is adjusted to NRV, the estimated amount recoverable after expected defaults and costs of collection. Companies commonly use aging analysis to estimate losses and determine the allowance.

Management: Effective receivable management includes credit approval, clear invoicing terms (for example net 30, or 2/10 net 30), monitoring of overdue accounts, and disciplined collection or escalation procedures. Bad debts can be written off against the allowance or directly, depending on policy.

Importance and financing: Receivables affect liquidity and working capital metrics such as days sales outstanding. Some firms monetize receivables through factoring or securitization.