When a business endorses a note and transfers it to a bank, the process is called
A) discounting a note receivable.
B) cosigning a note receivable.
C) collecting a note receivable.
D) dishonoring a note receivable.

Question

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Discounting a note receivable refers to transferring the ownership of a note to a financial institution at a discounted value. The financial institution assumes ownership of the note and provides immediate cash to the business, while earning a profit when the note is repaid by the debtor. Cosigning a note receivable refers to a situation where an individual guarantees repayment of a note if the borrower defaults. Collecting a note receivable refers to receiving payment from the debtor on the note. Dishonoring a note receivable refers to the situation where the debtor does not make payment on the note as specified, resulting in default.

When a Business Endorses a Note and Transfers It to a Bank