Notes

Receivable
LEARNING OUTCOMES
At the end of this lesson, you should be able to:
• To understand the concept and nature of notes receivable.
• To know the initial and subsequent measurement of notes
receivable
• To know the accounting for interest-bearing note receivable
• To know the accounting for noninterest-bearing note
receivable.
Notes receivables are claims supported by formal promise
to pay a certain sum of money at a specific future date
usually in the form of a promissory note.
Represents claims arising from the sale of merchandise or service in the
ordinary course of business.
Notes receivable are formal credit arrangements between a creditor (lender)
and a debtor (borrower). Notes arise from loans to other entities.
The note may be payable on demand or a definite future date.
Notes receivable are classified as either current or noncurrent depending on
the expected collection date(s).
A promissory note is a written
contract in which one person
known as the maker,
promises to pay another
person, known as the payee,
a definite sum of money.
Negotiable promissory note
that is an unconditional
promise in writing.
DISHONORED NOTES
a. When a promissory note matures and is not paid, it is said
to be dishonored.
b. Dishonored notes receivable should be removed from the
notes receivable account and transferred to accounts
receivable. The amount debited to accounts receivable should
include the face amount, interest, and other charges.
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Assessment………