Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 8: Q1RQ (page 465)

What is the difference between accounts receivable and notes receivable?

Short Answer

Expert verified

Answer

Notes receivables are long-term payments made under a contract over an extended period with interest. Accounts receivable is the amount of sales for which payment is due from the customer.

Step by step solution

01

Meaning of Account receivables

Planning and managing obligation owing to the client on account of credit deals are alluded to as account receivables.

02

Difference between accounts receivable and notes receivable

The right to receive money from consumers in the future in exchange for products sold or services rendered is represented by accounts receivable. Receivables are typically collected in a limited amount, like 30 or 60 days. Accounts receivable typically have shorter terms than notes receivable. Notes receivable are evidence of a borrower's written promise to pay a particular principal plus interest by a specific date in the future.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

During August 2018, Lima Company recorded the following:

• Sales of \(133,300 (\)122,000 on account; \(11,300 for cash). Ignore Cost of Goods Sold.

• Collections on account, \)106,400.

• Write-offs of uncollectible receivables, \(990.

• Recovery of receivable previously written off, \)800.

Requirement:

1. Journalize Lima’s transactions during August 2018, assuming Lima uses the direct write-off method.

2. Journalize Lima’s transactions during August 2018, assuming Lima uses the allowance method

Accounting for notes receivable and accruing interestCarley Realty loaned money and received the following notes during 2018.Note Date Principal Amount Interest Rate Term

(1) Apr. 1 $ 6,000 7% 1 year

(2) Sep. 30 12,000 6% 6 months

(3) Sep. 19 18,000 8% 90 days

Requirements

1. Determine the maturity date and maturity value of each note.

2. Journalize the entries to establish each Note Receivable and to record the collection ofprincipal and interest at maturity. Include a single adjusting entry on December 31, 2018, the fiscal year-end, to record accrued interest revenue on any applicable note.Explanations are not required. Round to the nearest dollar.

What occurs when a business pledges its receivables?

What is a critical element of internal control in the handling of receivables by a business? Explain how this element is accomplished.

What is the difference between the percent-of-receivables and aging-of-receivables methods?
See all solutions

Recommended explanations on Business Studies Textbooks

Business Development

Read Explanation

Financial Performance

Read Explanation

Managerial Economics

Read Explanation

Business Case Studies

Read Explanation

Business Operations

Read Explanation

Strategic Analysis

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free