Jeff Company issues a promissory note to David Company to get extended time on an account payable.David records this transaction as follows:
A)debit Accounts Receivable; credit Notes Receivable.
B)debit Notes Receivable; credit Accounts Receivable.
C)debit Notes Payable; credit Accounts Payable.
D)debit Accounts Payable; credit Notes Payable.

Question

Quizplus · Accepted Answer

Since Jeff Company issued a promissory note to David Company, the transaction should be recorded as Jeff Company owing David Company the amount of the note, which is represented by Notes Receivable account for David and Accounts Receivable account for Jeff. Therefore, the correct entry is to debit Notes Receivable and credit Accounts Receivable.

Jeff Company Issues a Promissory Note to David Company to Get