Question

What is the preferable presentation of accounts receivable from officers, employees, or affiliated companies on a balance sheet? As trade notes and accounts receivable if they otherwise qualify as current assets. As assets but separately from other receivables. As offsets to capital. By means of footnotes only.

Answer 1

As assets but separately from other receivables.

Step-by-step explanation:

When a company lends money to its employees, managers or affiliated companies, or sells goods or services to them, it must report those accounts or notes receivables in a separate account than normal transactions carried out with external customers. This happens because the transactions must be verifiable to check if they were legal and followed the proper procedures, and at what price or interest rate were they carried out. E.g. a corporation that lens $10 million to its CEO at 1% interest rate is not doing things properly and that transaction should be reversed and proper interest rates must be charged.