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:
“The rebellion is against time pollution, the feeling that the essence of what makes life worth living—the small moments, the special family getaways, the cookies in the oven, the weekend drives, the long dreamlike summers Mso much of this has been taken from us, or we have given it up. For what? Hitachi stereos? Club Med? Company cars? Racquetball? For fifteen-hour days and lousy day care?”
—Richard Louv (20th century)
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—Amy Laura Dombro (20th century)