Meaning of Other receivables
Other receivables generally come with the headings “Trade receivables and others” in the financial statement of large listed public companies. Other receivables are disclosed under the heading “Current Assets” on the balance sheet of the company at the end of the period.
These are residual trade or non-trade receivables that have not been specified by the company or regulations or do not meet the criteria of being classified separately.
Other receivables are listed under the assets side of the firm’s balance sheet. These come below the headings of Trade receivables.
Other receivables are characterized as uncommon or insignificant. Other receivables are rarely recorded in the financial statements, hence, the net balance in the Other receivables account is typically small.
List of Commonly Know Other Receivables:
- Interest receivables
- Prepaid expenses
- Advance from supplies
- Advance from employee
- Advance from Shareholders (Also can report under amount due from shareholders)
- Advance from directors (Also can report under amount due from director)
- VAT Receivable
- Income tax receivable
- Insurance claims receivable
- Prepaid insurance
- Receivables from employees
The company is running an account of petty expenses. It has been paid in advance to the coffee shop for 15 days and the coffee shop will reduce all the expenses against the advance.
Even then, at the end of the month, the advances of $140 still remain. The company has to show this amount on its balance sheet.
It has to show this receivable in “Other receivables”. This advance amount should not be classified as trad receivable
Understanding Other receivables
Other receivables consist of temporary accounts which even do not repeat every year. Depending on the industry and industry practices, the explanations of Other receivables can be found in the quarterly and annual filings by the company.
To simplify miscellaneous trade and non-Trade receivables of the large-sized companies, the term “Other receivables” has been established to represent all the small items of trade and non-trade receivables. The major components of assets are either long-term assets (non-current assets) or current assets.
Long-term assets are non-current assets such as plants and machinery, buildings, land, long term investments. These assets are subjected to be used for more than one year and the value of assets is reduced due to depreciation and impairment.
On the other hand, current assets are short-term assets that have to be paid or use within 12 months.
They are the assets that can be easily paid by liquidating current assets in the process of daily operations. Current assets include trade receivables, accounts payable, and income taxes payable. Current assets that are not specified or uncommon won’t be categorized under current assets.
Instead, they will be thrown into the residual heading of Other receivables. Instead, these assets will be taken to a generic “other” category and would be recognized as Other receivables on the balance sheet.
Examples of Other receivables shall include:
Things to be noted
For publicly listed companies, they have to give a clear breakdown of Other receivables in their quarterly and annual filings.
However, they represent no so significant amount of money. Hence, the companies may choose to ignore showing Other receivables separately.
However, Other receivables would be placed under footnotes on financial statements. Rarely explanations are needed for Other receivables. However, when needed, the company shall offer explanations in notes to accounts.
Other receivables are generally assumed to be disposed of within an accounting cycle that would be 12 months. The nature of each Other receivables needs to be determined. It is important for the management to know about the liquidity of Other receivables.
If accounts in Other receivables in the past year become material in the current year, they may need to be disclosed into major defined Current assets accounts. This would slowly create insightful information in the minds of investors.
There is no formula for computing the Other receivables. Either the small amounts will aggregate to form Other receivables or there won’t be any Other receivables.
Other receivables = Petty expenses receivables + Advance weekly wages to cleaning staff + Advance supplies
Let’s take the example of Sinra Ltd which had recently filed its annual financial statements. The following details about Current assets were available
Petty expenses receivables $45
Advance weekly wages to cleaning staff $105
Advance supplies $95
The Calculation of Other receivables can be done as:
|Other current assets|
|Petty expenses receivables||45|
|Advance weekly wages to cleaning staff||105|
|Total other receivables||245|
When to disclose Other receivables separately?
The probability of disclosing Other receivables separately stands at zero. The large listed companies generally go by the heading “Trade receivables and Other” where Other receivables are incorporated.
However, circumstances change abruptly and management has to evaluate this question carefully before any disclosure is made. There are very outside chances that other receivables will become significant.
Is other receivables a current asset?
Other current receivables normally include Advance, Prepayment, Prepaid Insurance, and other non-trade receivables that are subject to receiving within 12 months from the reporting period.
These assets are classified as current assets on the balance sheet and are subject to classification as expenses when they are used or collected into cash within 12 months. For example, prepaid expenses are classified as expenses within 12 months in the income statement.
Other Receivables Journal Entry:
Recording journal entries of other retrievable are also the same as recording journal entries of assets accounts. The increase in other receivables is recorded in debit and decreasing of it is recorded in credit.
Are other receivables different from Trade receivables?
In terms of classification, Other receivables have the same classification as Trade Receivable. They are both recording the balance sheet under the classification of the current asset. However, both accounts are different in nature. Trade receivables are the receivable from credit sales that the company sells its goods or products while Other receivables are the receivable from non-trading activities.