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What Is Loans Receivable?

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  • Written By: Esther Ejim
  • Edited By: Kaci Lane Hindman
  • Last Modified Date: 24 November 2016
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Loans receivable is an accounting term that refers to the manner in which lenders classify the outstanding money owed them by debtors. The lender could be anyone form banks, financial institutions and private investors to individuals. Loans receivables are entered in the accounting ledgers of the lenders as money that is yet to be repaid by the borrowers. Like all accounting processes, this one is done in a manner that is clear and logical. The total sum of loans receivables excludes the inclusion of the interests owed to the lender by the borrower on the outstanding money.

One of the methods for the calculation of loans receivable is by the attribution of different due dates for the outstanding loans. This allows the lender to calculate the level of delinquency and to discover those borrowers who are more creditworthy than others. The loans that are calculated as part of loans receivables may be made to an organization or to an individual, depending on the type of loan. In the case of individuals, the loans receivable may be in the form of a line of credit that the bank or financial institution has opened on behalf of the client. Such finances have periods within which they must be repaid, all of which will be calculated as part of the loans receivables.

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A related term is accounts receivables, which refers to the outstanding debt owed to companies or owners of businesses by their customers for tangible items or specific services. By the same application, the loan application is outstanding money that is yet to be paid to the person or institution that lent the money to the borrower. As such, one institution might have both a loans receivable and account receivable on the same client or customer. The terms of the loans will determine when the debtor will pay back the money.

In some cases, the loan may be short-term, or it may be long-term, all of which are indicated in the ledger during the calculation of the exact money owed, when the money is due, and other applicable factors. For a company or owner of business, since the money owed by a debtor is expected money, it is classified as a part of the asset of the person or company. As such, the calculations of loans receivables are included in the financial statement of individuals or companies as a part of their net worth.

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