Day 73: Intro to Notes Receivable

Promissory Note: 

• written promise to pay certain amount on a preset day usually with interest

Types of Receivables

• Accounts Receivable
• Notes Receivable
• current assets less than 12 months
• investments more than 12 months
• Other Receivables
• interest receivable
• income tax refund receivable
• employee advance receivable
• loan receivable

Interest

• charge for using another's money
• I = P * R * T
• time expressed as fraction of a year
• 6 months = 6/12
• 90 days = 90/360

Maturity Value

• Principle (Face Value) plus Interest
• MV = P + I

Issue Date

• Debit Notes Receivable for face value
• Credit Service Fees (or A/R if exchanging A/R for Note)

Maturity Date

• Debit Cash (A/R if dishonored)
• Credit Notes Receivable and Interest Income (I = P * R * T)