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Instructor Blog - Statement Spreading

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Spreading Financial Statements


  • admin

  • 11/20/2019 7:56:11 AM

  • 654

  • Statement Spreading
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Q: Are A/R – Other always non-trade related or is this something you need to see the notes for or speak with the borrower?

A: A/R – Other could be trade related or related to some other activity, such as the sale of an asset in which the buyer owes the company. One always needs to identify the underlying transactions via footnotes, if possible, or questions for the bookkeeper or accountant unless the A/R – Other is a very nominal amount.

Q: Why wouldn't work-in-process be categorized as inventory instead of accounts receivable?

A: Work-in-process should be classified as an inventory component and not as an account receivable. Such a misclassification could have a material impact on resulting Inventory Days and Accounts Receivable Days.

It is worth noting, however, there is a difference between inventory work-in-process and unbilled work-in-progress used in the percentage of completion method of accounting.

The term "work-in-process" refers to a manufacturer's inventory that is not yet completed. Work-in-process is the goods that are on the factory floor of a manufacturer. The amount of work in process inventory would be reported along with raw materials inventory and finished goods inventory on the manufacturer's balance sheet as an inventory on the balance sheet.

The term "work-in-progress" means construction of long-term assets that are not yet completed. It is used in the construction industry, where companies calculate the proper billing time when the contract calls for percentage completion billing. So, a construction company will bill its client at various stages of the project. If it bills for less than the work-in-progress that is completed at the billing date, the amount that is under-billed is classified as “Unbilled Receivables” or “Cost and Profit in Excess of Billings”. The balances in such asset accounts are classified as a component of the total accounts receivable balance.

Course overview: Spreading Financial Statements

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