The principal reason for converting a customer's account receivable to a note receivable is:
A)the note receivable earns interest and the account receivable does not.
B)the receivable is less likely to have to be written off as uncollectible.
C)working capital is immediately increased.
D)the customer is more likely to continue purchasing the company's products.

Question

Quizplus · Accepted Answer

Converting an account receivable to a note receivable allows the company to earn interest on the amount owed, which is not possible with a standard account receivable.

The Principal Reason for Converting a Customer's Account Receivable to a Note