[FDNACCT] Unit 4 (Part 2): Journalizing Promissory Notes Transactions

Negotiable instruments

A financial document containing a promise or order to pay, that meets all the legal requirements to be transferable to another party

Notes Receivable

An asset that represents a written promise by the debtor to pay the creditor a specified amount at a specified future date, usually requiring an additional receipt of explicit interest

Notes Payable

Current liabilities if due within one year

Notes Payable

Non-current liabilities if due in more than one year

Interest Expense

Non-operating expense

Notes Receivable

Current asset if due within one year

Notes Receivable

Non-current asset if due in more than one year

Interest Income

Non-operating income

Interest

Fee charged for use of money

Accounts Receivable

A customer’s promise to pay on credit in the books of the seller

Promissory Note

must contain a conditional promise or order to pay a sum certain in money