A promissory note received from a customer in exchange for an account receivable is recorded by the payee as:
A)A cash equivalent.
B)An account receivable.
C)A note receivable.
D)A short-term investment.
E)A note payable.

Question

Quizplus · Accepted Answer

When a company receives a promissory note from a customer in exchange for an account receivable, it is recorded as a note receivable on the payee's balance sheet. This is because the payee is now owed a specific amount of money by the issuer of the promissory note, and the note represents a promise to pay that amount at a future date. The other choices do not accurately reflect the transaction, as the note is not equivalent to cash, does not represent a short-term investment, and is not a liability for the payee.

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