When a company discounts its notes receivable at a bank, the common practice is to record the discounted notes in a(n)

A) liability account
B) contra-asset account
C) asset account
D) expense account

Question

When a company discounts its notes receivable at a bank, the common practice is to record the discounted notes in a(n)A) liability accountB) contra-asset accountC) asset accountD) expense account

stephanie glass · Accepted Answer

Final Answer : B, Explanation :  When a company discounts its notes receivable at a bank, it is common practice to record the discount (the interest charged by the bank for the service of providing cash before the note's maturity) in a contra-asset account. This account is used to reduce the value of the notes receivable on the balance sheet, reflecting the cost of obtaining cash early.

When a company discounts its notes receivable at a bank, the common practice is to record the discounted notes in a(n)

A) liability account
B) contra-asset account
C) asset account
D) expense account

Definitions

Learning Objectives

Learning Objectives

Related questions

When a company discounts its notes receivable at a bank, the common practice is to record the discounted notes in a(n) A) liability accountB) contra-asset accountC) asset accountD) expense account

Definitions

Learning Objectives

Learning Objectives

Related questions

When a company discounts its notes receivable at a bank, the common practice is to record the discounted notes in a(n)

A) liability account
B) contra-asset account
C) asset account
D) expense account