Balance Sheet Flashcards
1
Q
Right to Offset
A
A general principle of accounting is that the offsetting of assets and liabilities in the balance sheet is improper except where a right of setoff exists. For example, a debtor with a payable to an entity may not offset a receivable from that same entity and display only the difference as a net payable or receivable unless the following specified conditions are met for the right of setoff to exist:
a. Each of the two parties owes the other determinable amounts.
b. The reporting party has the right to set off the amount owed with the amount owed by the other party.
c. The reporting entity intends to set off.
d. The right of setoff is enforceable at law.
