Asked by eunice morel on May 26, 2024
Verified
When referring to a note receivable or promissory note,
A) the maker is the party to whom the money is due
B) the note is not considered a formal credit instrument
C) the note cannot be factored to another party
D) the note may be used to settle an accounts receivable
Note Receivable
A written promise that one party will pay another party a specified sum of money, either on demand or at a set future date.
Promissory Note
A financial instrument in which one party promises in writing to pay a determinate sum of money to the other, either at a fixed or determinable future time or on demand of the payee, under specific terms.
Accounts Receivable
Funds that customers owe to a business for products or services already provided but not yet compensated for.
- Acquire knowledge of the concepts and the treatment in accounting for promissory notes and notes receivable.
Verified Answer
MS
Michael SchneiderMay 29, 2024
Final Answer :
D
Explanation :
A note receivable or promissory note can indeed be used to settle an accounts receivable, where the debtor issues a promissory note to the creditor, promising to pay the amount owed at a future date under specified terms. This formalizes the debt and can provide the creditor with a more secure claim.
Learning Objectives
- Acquire knowledge of the concepts and the treatment in accounting for promissory notes and notes receivable.