Tuesday, June 12, 2012

Notes Receivables Journal Entries

What are Notes Receivables?

Notes Receivable arise on a company's balance sheet when the seller asks for a promissory note to replace an Accounts Receivable that is due. This generally occurs when the customer requests additional time to pay a past-due account that is owed to the company.

A promissory note is then a written promise to pay a specific amount of money, usually including interest, at a future date. The journal entries required are:


  • Converting an accounts receivable to a note receivable.
  • Recording an adjusting entry for interest receivable at the end of the accounting period.
  • Recording receipt of note payment and interest when due.
  • Recording a dishonored note  

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