Asked by Lily Nyarko on Jul 21, 2024
Verified
A promissory note received from a customer in exchange for an account receivable is recorded by the payee as:
A) A cash equivalent.
B) An account receivable.
C) A note receivable.
D) A short-term investment.
E) A note payable.
Promissory Note
A financial instrument containing a written promise by one party to pay a definite sum of money to another party at a specified future date or on-demand.
Account Receivable
The amount customers are required to pay to a firm for goods and services already received but not yet paid for.
Payee
The party in a financial transaction who receives the payment.
- Differentiate between various types of receivables and their recording.
Verified Answer
JA
Jenika AtanacioJul 27, 2024
Final Answer :
C
Explanation :
A promissory note received from a customer represents a legal obligation for the customer to pay the amount owed, and therefore is recorded by the payee as a note receivable. The note receivable account is a separate asset account on the balance sheet and reflects the amount of the note and the terms of repayment.
Learning Objectives
- Differentiate between various types of receivables and their recording.