Electron borrowed $75,000 cash from TechCom by signing a promissory note. TechCom's entry to record the transaction should include a:
A) Debit to Notes Receivable for $75,000.
B) Debit to Accounts Receivable for $75,000.
C) Credit to Notes Receivable for $75,000.
D) Debit Notes Payable for $75,000.
E) Credit to Sales for $75,000.

Question

Quizplus · Accepted Answer

TechCom is the party who is lending money and therefore has an asset in the form of a Notes Receivable. When Electron borrows money and signs a promissory note, it becomes the debtor, and the amount borrowed becomes a liability known as Notes Payable. Therefore, TechCom should debit Notes Receivable to record the transaction, which represents an increase in its asset.

Electron Borrowed $75,000 Cash from TechCom by Signing a Promissory