Meaning of Other receivables
Other receivables generally come with headings “Trade receivables and others” in the financial statement of large listed public companies. Other receivables are disclosed under the headings “Current Assets”.
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. They are referred to as they are uncommon and insignificant like the major accounts of Current assets as Trade receivables, accounts payable, income taxes payable.
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 Other receivables account is typically small.
The company is running an account of petty expenses. It has paid in advance to 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 in its balance sheet. It has to show this receivable in “Other receivables”
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 on Other receivables can be found on 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” have been established to represent all the small items of trade and non-Trade receivables. The major components of assets are either long term assets or Current assets.
Long term assets are non-current assets such as plant and machinery, buildings, land, long term investments. These assets have span of more than 1 year and are payable in more than 1 year. On the other hand, Current assets are short term assets which have to be paid within 12 months.
They are the assets that can be easily paid with liquidating current assets in the process of daily operations. Current assets include Trade receivables, accounts payable, 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 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 to financial statements. Rarely explanations are needed for Other receivables. However, when needed, the company shall offer the explanations in notes to accounts.
Other receivables are generally assumed to be disposed of within a 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, it 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 that 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 :
|Petty expenses receivables||45|
|Advance weekly wages to cleaning staff||105|
When to disclose Other receivables separately?
The probability of disclosing Other receivables separately stands 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 hast to evaluate this question carefully before any disclosure is being made. There are very outside chances that other receivables will become any significant.