Non-trade receivables are amounts owed to a business that are not related to the business’s primary operations involving the sale of goods or services. While trade receivables (often simply called “receivables”) typically come from customers who have purchased goods or services on credit, non-trade receivables originate from other sources.
Examples of non-trade receivables include:
- Advances to Employees: These are amounts loaned out to employees for travel expenses or other purposes, which the employees will repay to the company.
- Income Tax Refunds: If a business has paid more income tax than it owes, it may have a receivable from the government for the excess tax payment.
- loans to Other Companies: If the business has loaned money to another company, that loan would be a non-trade receivable.
- Deposits with Suppliers or Utilities: Sometimes, a business may give a deposit to a supplier or utility company as a guarantee. This would also be a non-trade receivable.
- Dividends or Interest Receivable: If a business owns investments that earn dividends or interest, the amount of dividends or interest owed to the business can be considered a non-trade receivable until it is received.
In the financial statements, non-trade receivables are often combined with trade receivables under the heading “Accounts Receivable,” but they may also be listed separately depending on the materiality and the company’s preferred presentation format.
Example of Non-Trade Receivables
Let’s imagine a scenario involving a fictional company, “XYZ Corp.”
- Advances to Employees: XYZ Corp. advances $5,000 to an employee for an overseas business trip. Until the employee accounts for these expenses with receipts or returns the unspent money, this $5,000 is considered a non-trade receivable.
- Income Tax Refunds: After filing its annual tax return, XYZ Corp. determines that it overpaid its taxes by $10,000. The $10,000 it expects to get back from the government as a refund is a non-trade receivable.
- Loans to Other Companies: XYZ Corp. loans $50,000 to a startup company as part of a strategic partnership. This $50,000 is considered a non-trade receivable until it is repaid.
- Deposits with Suppliers or Utilities: XYZ Corp. makes a $2,000 deposit to a utility company when it opens a new office location. This $2,000 deposit is a non-trade receivable.
- Dividends or Interest Receivable: XYZ Corp. owns shares in another company that announced a dividend. Until the dividend is actually received, the amount due to XYZ Corp. is considered a non-trade receivable.
These non-trade receivables will be reported on XYZ Corp.’s balance sheet and will be realized either by being offset against expenses (like in the case of advances to employees), or converted into cash (like in the case of income tax refunds, loans to other companies, deposits with utilities, or dividends receivable).