Special Uses
Companies can use their accounts receivable as collateral when obtaining a loan (asset-based lending). They may also sell them through factoring or on an exchange. Pools or portfolios of accounts receivable can be sold in capital markets through securitization.
For tax reporting purposes, a general provision for bad debts is not an allowable deduction from profit - a business can only get relief for specific debtors that have gone bad. However, for financial reporting purposes, companies may choose to have a general provision against bad debts consistent with their past experience of customer payments, in order to avoid over-stating debtors in the balance sheet.
Read more about this topic: Accounts Receivable
Famous quotes containing the word special:
“Those of us who are in this world to educate—to care for—young children have a special calling: a calling that has very little to do with the collection of expensive possessions but has a lot to do with the worth inside of heads and hearts. In fact, that’s our domain: the heads and hearts of the next generation, the thoughts and feelings of the future.”
—Fred M. Rogers, U.S. writer and host of Mr. Rogers Neighborhood. “That Which is Essential Is Invisible to the Eye,” Young Children (July 1994)
“In this century the writer has carried on a conversation with madness. We might almost say of the twentieth-century writer that he aspires to madness. Some have made it, of course, and they hold special places in our regard. To a writer, madness is a final distillation of self, a final editing down. It’s the drowning out of false voices.”
—Don Delillo (b. 1926)