Notes can be discounted;the accounts receivable represented by notes are taken out of the assets at the time of discounting.However,this can still represent:
A) A potential gain
B) A latent liability
C) A fictive asset
D) None of these

Question

Quizplus · Accepted Answer

Discounting a note means selling it to a third party at a discount, which means the note holder is receiving less than the full value of the note. This creates a liability for the note holder, as they are still obligated to pay the full value of the note to the third party, while they have already received less than that amount. Therefore, the discounted notes still represent a latent liability.

Notes Can Be Discounted;the Accounts Receivable Represented by Notes Are