- Demonstrate receivables as current and noncurrent assets
You should classify a note receivable in the balance sheet as a current asset if it is due within 12 months or as non-current (i.e., long-term) if it is due in more than 12 months.
Here is an excerpt from the balance sheet (here called the statement of Financial Position) of Caterpillar, Inc. (Annual Report for 2019 Download PDF page 54):
|Cash and Short Term Investments||$8,284||$7,857|
|Receivables – Trade and other||8,568||8,802|
|Receivables – Finance||9,336||8,650|
|Prepaid expenses and other current assets||1,739||1,765|
|Total Current Assets||Single Line39,193||Single Line38,603|
|Property, Plant and Equipment, net||12,904||13,574|
|Long-term receivables – trade and other||1,193||1,161|
|Long-term receivables – finance||12,651||13,286|
|Noncurrent deferred and refundable income taxes||1,411||1,439|
|Single Line$78,453Double Line||Single Line$78,509Double Line|
Caterpillar separates receivables into both current and long-term, depending on when they are going to be collected, and also into trade receivables and finance receivables, since the company offers dealers financing.
The term trade receivables refers to any receivable generated by selling a product or providing a service to a customer. For Caterpillar, Inc., according to the notes, trade receivables refers to “any receivable generated by selling a product or providing a service to a customer.”
A non-trade receivable would arise when someone owes the company money not related to providing a service or selling a product. For example, the company loans an employee money for a travel advance or a company borrows money from another company.
As you will see in the next section, the notes that accompany the financial statements include details in addition to the numbers on the balance sheet and income statement.