Describe a note receivable and compute interest and maturity date
the maker of a note
The person or business that signs a note and thus promises to make payment.
the maturity of a note is expressed in months / years
maturity is on the same day of the month as the original date ex. 3 month note started on Jan. 10 - due Apr. 10
maturity date
number of days after the note's date
examples for using promissory notes are
paying for products or services and lending and borrowing money
the amount borrowed on a note is referred to as the
principle
what is the calculation to find the interest due on a note ?
principle of the note x annual interest rate x time expressed in fraction of a year = interest
to a lender interest is
revenue
when the maturity of a note exceeds 30 days, it can be helpful to set up a
schedule to determine the maturity date
for legal reasons, sellers generally prefer to receive notes when
the credit period is long, and when the receivable is a large amount
due date/maturity date
the date the note is to be paid
the maturity date countdown starts when
the day after the note was signed / began
The maturity date is
the day the note (principal and interest) must be repaid
Note Receivable
Asset (usually Long-Term). Anticipation of future cash payments, with interest, from a customer or borrower.
maturity date of a note
The date the note (principal and interest) must be repaid.
when something is due on demand it means that
it is due simply when the lender demands that it is due
Sellers sometimes ask for a note receivable to replace an account receivable when
a customer requests more time to pay a past-due account
note payable
a liability resulting from the signing of a promissory note
A note receivable is a
a written promise to pay a specified amount of money at a stated future date.
promissory note
a written promise to pay a specified amount of money on demand or at a definite time, usually with interest
because accounts receivable and notes receivable have different legal standings, they are
accounted for seperately
Interest rates are normally stated in
annual terms
banker's rule
calculating interest based on 360 days in the calendar year Time is exact days/360 in calculating simple interest
a note was signed on June 15th and has a 5 day maturity rate. On what date will the amount be due
count five days after the 15th, so it will be due the 20th
many notes express a maturity period expressed in
days (each day, not just business days, is counted)
A note received is recorded at its principal amount by
debiting the Notes Receivable account.
to a borrower interest is an
expense
The amount of interest on the note is computed by
expressing time as a fraction of one year and multiplying the note's principal by this fraction and the annual interest rate.
we continue to use the banker's rule today for
interest computations
payee of a note
the person or business to whom the amount of a note is payable
period of a note
the time from the note's (contract) date to its maturity date