Additional time given to the payee to settle an account with issuance of a note, results in a transfer of:
A) assets from Notes Receivable to Accounts Receivable.
B) assets from Accounts Receivable to Notes Receivable.
C) liabilities from Notes Payable to Accounts Payable.
D) liabilities from Accounts Payable to Notes Payable.

Question

Quizplus · Accepted Answer

When a payee is given additional time to settle an account and a note is issued, the company's asset account transitions from Accounts Receivable (an amount expected to be received) to Notes Receivable (a formal agreement to receive a specific amount by a certain date). This reflects a more formalized promise to pay.

Additional Time Given to the Payee to Settle an Account