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  • IA1-Notes Receivable

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    Kyang Wynn
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    This document discusses notes receivable in accounting. It defines notes receivable as formal promises to pay in the form of notes. Negotiable promissory notes are unconditional written promises to pay a fixed sum of money on a specified date. Dishonored notes that are not paid at maturity are removed from notes receivable and transferred to accounts receivable. Notes receivable are presented as either current or noncurrent and measured initially at face value or present value and subsequently at face value or amortized cost depending on whether they are interest-bearing or noninterest-bearing.

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    This document discusses notes receivable in accounting. It defines notes receivable as formal promises to pay in the form of notes. Negotiable promissory notes are unconditional written promises to pay a fixed sum of money on a specified date. Dishonored notes that are not paid at maturity are removed from notes receivable and transferred to accounts receivable. Notes receivable are presented as either current or noncurrent and measured initially at face value or present value and subsequently at face value or amortized cost depending on whether they are interest-bearing or noninterest-bearing.

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    15 views1 page

    IA1-Notes Receivable

    Uploaded by

    Kyang Wynn
    This document discusses notes receivable in accounting. It defines notes receivable as formal promises to pay in the form of notes. Negotiable promissory notes are unconditional written promises to pay a fixed sum of money on a specified date. Dishonored notes that are not paid at maturity are removed from notes receivable and transferred to accounts receivable. Notes receivable are presented as either current or noncurrent and measured initially at face value or present value and subsequently at face value or amortized cost depending on whether they are interest-bearing or noninterest-bearing.

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    © All Rights Reserved
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    of 1

    INTERMEDIATE ACCOUNTING 1

    CHAPTER 6
    NOTES RECEIVABLE

    Notes Receivable
    ● Claims supported by FORMAL PROMISES to pay in the forms of notes.

    Negotiable Promissory Notes


    ● Unconditional promise in writing made by one person to another, signed by the maker,
    engaging to pay on demand or at a fixed determinable future time a sum certain in
    money to order or to bearer.

    Dishonored Notes
    ● Promissory note that matures and is not paid
    ● Removed from notes receivable account and transferred to ACCOUNTS RECEIVABLE
    (amount debited to accounts receivable should include the face amount, interest and other
    charges).

    Presentation of Notes Receivable


    ● Current (whether LT or ST, as long as it involves the primary course of business; nontrade but
    within 1 year)
    ● Noncurrent (nontrade; beyond 1 year)

    Measurement of Notes Receivable


    Initial Measurement Subsequent Measurement

    Short-term ● Face Value ● Face Value


    - Interest-bearing - Interest-bearing
    - Noninterest-bearing - Noninterest-bearing

    Long-term ● Face Value ● Face Value


    - Interest-bearing - Interest-bearing
    ● Present Value ● Amortized Cost
    - Noninterest-bearing - Noninterest-bearing

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