A promissory note received from a customer in exchange for an account receivable:
A) Is a cash equivalent for the recipient.
B) Is an account receivable for the recipient.
C) Is a note receivable for the recipient.
D) Is a short-term investment for the recipient.
E) Is a note payable for the recipient.

Question

Quizplus · Accepted Answer

The promissory note received from a customer in exchange for an account receivable represents a legally binding promise to pay a certain amount at a certain time. As such, it is classified as a note receivable, which is an asset account that represents the amount owed to the recipient of the note. The note receivable will be recorded at its present value and subsequent payments will be recorded as cash receipts.

A Promissory Note Received from a Customer in Exchange for an Account