Reading Financial Statements Series© Balance Sheet Part 3 - Receivables

By:  Jeremy Newman CPA, Newman Certified Public Accountant PC

Receivables

Receivables are an asset which is generally presented just below cash on the balance sheet. It represents amounts the association has the right to receive.

Receivables are amounts due from other people or entities.  For associations, the largest and most common receivable is for unpaid assessments.  Most associations bill owners for assessments each month.  If an owner has not paid their monthly assessment by the due date, the assessment is considered a receivable from the owner.

Recording assessments revenues on the accrual basis without considering the effect of delinquent accounts receivable can mislead readers of an association’s statement of revenues and expenses.  Assessments are recorded when billed under the accrual method.  Should there be an accumulation of delinquent accounts, the statement of revenues and expenses will continue to present results assuming 100% collection of outstanding assessments.  Readers should always refer to an aging report to assess the status of assessments receivable. 

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