A promissory note:
A) Is a short-term investment for the maker.
B) Is a written promise to pay a specified amount of money at a certain date.
C) Is a liability to the payee.
D) Is another name for an installment receivable.
E) Cannot be used in payment of an account receivable.

Question

Quizplus · Accepted Answer

A promissory note is a written promise to pay a specified amount of money at a certain date. It is a legally binding agreement between the borrower (maker) and the lender (payee). It can be short-term or long-term, depending on the agreement between the parties. It is not a liability to the payee, but rather an asset. It is also not the same as an installment receivable, which is a term used to describe payments made on a debt over time. And while it cannot be used directly to pay an account receivable, it can be used to obtain funds to pay off an account receivable.

A Promissory Note