Amounts owed to a business by its customers for goods sold or services rendered on credit in the normal course of business.
Trade Receivables (also called Sundry Debtors or Accounts Receivable) represent money owed by customers for credit sales. They are a current asset on the balance sheet and a key component of working capital. Classification: Current (receivable within 12 months) and Non-current (beyond 12 months — rare for trade). Under Ind AS 109, trade receivables must be assessed for Expected Credit Loss (ECL) — a provision for probable defaults based on historical patterns. The balance is presented net of provisions. Effective receivables management involves credit policy, invoicing speed, follow-up processes, and collection mechanisms.
Company has ₹30,00,000 gross receivables. Aging: 0–30 days: ₹18,00,000, 31–60 days: ₹7,00,000, 61–90 days: ₹3,00,000, 90+ days: ₹2,00,000. ECL provision based on history: 0–30: 1%, 31–60: 3%, 61–90: 10%, 90+: 50%. Provision = ₹18,000 + ₹21,000 + ₹30,000 + ₹1,00,000 = ₹1,69,000. Net receivables: ₹28,31,000.
Ensures accurate financial reporting and record-keeping
Helps maintain regulatory and tax compliance
Enables better-informed business decisions
Improves operational efficiency and cash flow management
Trade Receivables arise from the company's MAIN BUSINESS (selling goods/services to customers on credit). Other Receivables include: advances to employees, security deposits, insurance claims, tax refunds, and amounts due from related parties. They're shown separately on the balance sheet for clarity.
Under Ind AS 109, companies use a 'simplified approach' — no need to track credit deterioration. Create a provision matrix based on historical default rates by aging bucket (e.g., 1% for current, 5% for 30+ days, 20% for 60+ days, 50% for 90+ days). Apply these percentages to current receivables. Adjust rates if forward-looking economic conditions suggest higher/lower defaults.
Money owed to a business by its customers for goods or services delivered but not yet paid for.
Money owed to a business that is unlikely to be collected and is written off as an expense, reducing both accounts receivable and profit.
A report that categorizes accounts receivable or payable by the length of time invoices have been outstanding, typically in 30-day buckets.
The average number of days it takes a company to collect payment after a sale has been made.
The difference between a company's current assets and current liabilities, representing the short-term liquidity available for day-to-day operations.
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