Asked by I’m Ashes on Jun 13, 2024
Verified
Sellers generally prefer to receive notes receivable rather than accounts receivable when the credit period is long and the receivable is for a large amount.
Notes Receivable
Financial assets representing amounts owed to the holder by others through formal written promises to pay at a future date.
Credit Period
The time frame allowed by a seller for a buyer to pay for goods or services, typically expressed in days.
- Recognize the consequences of employing notes receivable and their distinctions from accounts receivable.
Verified Answer
FI
Folopater IbrahimJun 14, 2024
Final Answer :
True
Explanation :
Notes receivable are a formal written promise to pay a specific amount of money at a specific date in the future, while accounts receivable are simply invoices for goods or services sold on credit. Sellers prefer notes receivable in these situations because they provide a more formal and legally binding obligation for the buyer to pay, reducing the risk of non-payment. Additionally, notes receivable can often be sold or used as collateral to obtain financing or improve cash flow.
Learning Objectives
- Recognize the consequences of employing notes receivable and their distinctions from accounts receivable.