3 5 Notes Receivable

What are Notes Receivable?

The amount of money the employee now owes qualifies as a notes receivable. Note Receivablemeans a promissory note or other right to payment received by Trendwest for Vacation Credits or Fractional Ownership Interests sold by Trendwest, and shall include both on and off balance sheet Notes Receivable. To show the initial recording of notes receivable, assume that on 1 July, the Fenton Company accepts a $2,000, 12%, 4-month note receivable from the Zoe Company in settlement of an open account receivable.

A closely related topic is that of accounts receivable vs. accounts payable. Notes receivables describe promissory notes that represent loans paid from a company or business to another party. The note comes with a promise from the borrower that it will repay the lender at a future point in time. Is a more formal legal contract between the buyer and the company, which requires a specific payment amount at a predetermined future date. The length of contract is typically over a year, or beyond one operating cycle. There is also generally an interest requirement because the financial loan amount may be larger than accounts receivable, and the length of contract is possibly longer. A note can be requested or extended in exchange for products and services or in exchange for cash .

Payment Of The Note

Is the part of a loan charged to the borrower, expressed as an annual percentage of the outstanding loan amount. Interest is accrued daily, and this accumulation must be recorded periodically . The Revenue Recognition Principle requires that the interest revenue accrued is recorded in the period when earned. Periodic interest accrued is recorded in Interest Revenue and Interest Receivable. To calculate interest, the company can use the following formulas.

Because the interest is not due to be paid until September 30, 2019, Shulte would also record a corresponding interest receivable as of July 31, 2019. Notes receivable transactions involve issuing the note, accruing interest earned, and receiving payment of the note including interest. For example, Shulte Company has had a $25,000 open account receivable balance for Labriola, Ltd., since January 31, 2019.

More Definitions Of Notes Receivable

This set of journal entries happen every year until the note is completely paid off. Add note receivable to one of your lists below, or create a new one. Suppose the borrower cannot pay the specified amount even after the due date.

Notes receivable can also be used as prepaid assets in the context of outside business transactions, because they are viewed as a favorable standing for any company. The face value of a note is called the principal, which equals the initial amount of credit provided.

Accounting Principles I

This ratio assesses a company’s ability to issue credit to its customers and collect funds from them efficiently. Fabio Ambrosio, CPA, instructor of accounting at the Central Washington University, details the characteristics of notes receivable and the accounting transactions involved in the reporting of notes receivable. What are Notes Receivable? A note receivable is always recorded on the company’s books at face value; even if the note charges the borrower interest. When this note is repaid, the borrower will pay both the face value of the note as well as interest due . To record the conversion of account receivable balance to note receivable.

The ability to raise cash in this way is important to small and medium-sized businesses, which may have limited access to finance. The Bullock Company’s journal entries for 1 November 2019, 31 December 2019, and 31 January 2020 are shown below.

Elements Of Promissory Notes

Companies classify the promissory notes they hold as notes receivable. Notes Receivablemeans, all promissory notes or other similar obligations to pay money, whether secured or unsecured, which are not over thirty days past due in which any Person has an interest.

  • The following journal entries occur at the note’s established start date.
  • Notes receivable is another line item on the balance sheet to record the amount a customer or client owes that the business has yet to receive.
  • The payee holds the note with the right to receive the payment from the maker.
  • The proceeds received when a note is discounted are computed by deducting from the maturity value of the note the amount of interest charged by the bank or finance company.
  • A company may have notes receivable from transactions with customers, suppliers, banks, individuals, or other companies for an amount past due on an account receivable or for the sale of a large item such as a piece of equipment.
  • Her education includes marketing and a bachelor’s degree in journalism from the University of Kansas.

A note receivable also comes with a predetermined interest rate after a mutual agreement of both parties. A note receivable will mention the two parties involved, the payee and the payer. The payee is the party that provides the loan, also known as the borrower. The interest rate selected for this purpose should approximate the rate at which the debtor could obtain similar financing from other sources.

Issuance Of Note Receivable Journal Entry

Finally, a note receivable will also mention the timeframe of the loan. It is similar to the maturity date of loans, representing a future point at which the borrower will repay the lender. Any discount or premium relating to notes receivable is reported in the balance sheet as s deduction from or as an addition to the face amount of the note. The description of notes receivable should include the effective interest rate. The process of discounting has three steps, as indicated in accompanying diagram. In the first step, the maker receives goods, services or cash from the payee in exchange for the note. In the second step, the payee discounts the note with a bank and receives the maturity value of the note less a discount charged by the bank.

What are Notes Receivable?

It had a condition that $ 125,000 would be paid along with interest due at the end of each month for the next four months. If interest on a bad debt https://accountingcoaching.online/ had previously been accrued, then a correcting entry is needed to remove the accrued interest from interest revenue and interest receivable .

What’s The Difference Between Notes Receivable And Notes Payable?

The principal value is $300,000, $100,000 of which is to be paid monthly. As with accounts receivable, there is always a chance that a customer will not pay the note when due. Nevertheless, the maker still has a financial obligation to the payee for the full amount owed. Accordingly, at the time of default, unless there is little to no possibility that the amount owed will be paid, the payee typically reclassifies this total amount to an account receivable. In the case of the Shulte/Labriola note, Labriola did not pay the note when due. On the due date, September 30, 2019, Shulte records the reclassification of the note to accounts receivable.

What are Notes Receivable?

Some companies’ recorded notes at face value even though the market rate exceeded the stated rate, thereby inflating notes receivable and sales. APB opinion NO. 21, however, requires the recording of the substance of the transaction over its form. Notes receivable often are used when the goods have a high unit or aggregate value and the purchaser of the goods wants to extend payment beyond the normal 30 to 90 day period of trade credit. In the banking and commercial credit fields, notes are the typical form of credit instrument used to support lending transactions.

Financial Glossary

For example, a two‐year, 10%, $10,000 note accrues $1,000 in interest during the first year. The principal and first year’s interest equal $11,000 when compounded, so $1,100 in interest accrues during the second year. When a note’s due date is expressed in days, the specified number of days is divided by 360 or 365 in the interest calculation.

Notes receivable have a higher probability of payment than purchases made on simple credit, which are known as open trade receivables. That’s because of the signed promissory note, which can be presented as evidence in a legal proceeding.

Notes Receivable

To illustrate notes receivable scenarios, let’s return to Billie’s Watercraft Warehouse as the example. BWW has a customer, Waterways Corporation, that tends to have larger purchases that require an extended payment period.

See The Latest News



[formidable id=7]



Matt is the lucky guy that gets to lead a team of passionate placemakers who work every day to make downtown San Antonio more beautiful, playful, prosperous, and welcoming. Since starting his career as an attorney, Matt accumulated 25+ years’ worth of experience in the private sector by founding play and creative companies; consulting for start-ups and Fortune 500s in strategy, innovation, and leadership; and serving as president and C-level executive for Scholastic, Klutz and LeapFrog, among others. Directly prior to moving to San Antonio, he was the Economic Development Director and Interim Land Use Director for Santa Fe, NM.  He and his daughter have visited 15 state capitals on their way to all 50! 

Elizabeth Burt


Liz is a passionate underutilized space evangelist known for collaboration matchmaking + play based troublemaking (snow, pumpkins, and Parisian mimes included). She graduated from the University of Texas at San Antonio College of Public Policy studying Public Administration (#BirdsUp)! More recently, she oversaw the award winning Activate Houston Street Initiative, a placemaking action plan to reinvigorate the historic pedestrian corridor in the heart of Downtown, which is recognized as a Best Practice in Public Space Management by the International Downtown Association, for which she is also a proud Emerging Leader Fellow.


[formidable id=19]


Contact Us

[formidable id=17]

Connie Garza


Connie is a native San Antonian with roots planted deeply on San Antonio’s Southside. She holds a Bachelor of Arts in International Relations and Global Studies from the University of Texas at Austin. Passionate about building strong communities, Connie loves acting as a connector to small businesses, entrepreneurs, and people to help each other reach their goals and work together. She works inbetween the Cultural Placemaking team and the Mainstreet Economic Development team, bringing vibrancy and support to urban core businesses to make downtown the place to be. When not at work, you can usually find her at the local plant nursery buying another plant, exploring new cafes/breweries, and spending time with family.

Laura Aldrich


Laura (She/Her) has a Bachelor’s degree in Art History from the University of Texas at Austin where she fostered a deep love for communication, critical theory, & experiential spaces. Her heart lies in community, communication, & creative spaces for connection & collaboration.

She’s found much of her life’s direction in sharing her love for fitness & yoga alongside her deeply lived passion for social equity & women’s equality.

Laura has years of experience in developing & carrying out creative, strategic project management, marketing & membership-based sales as well as large-scale events & leadership training.

Outside of work she can often be found biking downtown with friends, adventuring with her sweet pup on the Greenway & casually perusing the cheese aisle at Central Market. She finds simple pleasures in unexpected live music, mochi, freshly bought pairs of matching socks & toppling the patriarchy.

Priscilla Lopez


Priscilla or “P.Lo” as her teammates affectionately call her, has 20 years of corporate administrative experience. Priscilla attended The University of San Antonio with a focus on Business Administration. In her role as office “fixer,” she handles everything from communications and relationship management to IT sleuthing. On weekends you can find her enjoying a Truly poolside. She lives the vegan lifestyle and is  a proud member of the Peleton community.

Jacqueline Lucio


Jacque is a longtime downtowner with a deep passion for community service. She oversees Centro’s Clean & Safe and Homeless Outreach services, which aim to create a more beautiful, welcoming, inclusive, and hospitable downtown. For nearly two decades, Jacque has lived in downtown San Antonio and has been actively involved in the transformation of the urban core. Through her work with nonprofits, local government, and news media, she’s continually focused on championing more sustainable, diverse, and equitable communities. Jacque has led efforts to support asylum seekers, served as communications director for City Council District 5, and served in public affairs role for Clear Channel Outdoor San Antonio. Jacque studied Mass Communications and Mexican-American Studies at UTSA.

Matt Sirgo


Matt graduated from Texas Tech University in 2016 with a Dual Major in Media Strategies and Honors Arts & Letters with a minor in Italian (Benvenuto a tutti!). Matt oversees the marketing, public relations, and digital content for Centro. After sharing the story of Downtown San Antonio on digital channels, he enjoys creating TikToks about LGBTQ+ media. His mug graces a Fiesta Mural on the St. Mary’s Strip just north of Downtown. You can’t miss it. 

Andi Rodriguez


Andi is a long-time urban champion and leads Centro ‘people projects which tell our stories and bring us joy, such as Centro’s Art Everywhere and Zona Cultural. Serving on the Leadership Council of Urban Land Institute, she is a former city Planning Commissioner, Founding Chair of the Hemisfair Conservancy, Co-founder of Power of Preservation/PROM, former Chair of the Mayor’s Commission on the Status of Women and immediate past Chair of Leadership San Antonio. Andi considers herself a servant leader; she has an MS in Architecture/Urban Planning, and enjoys advocating for the unifying power of art, history, and public space.

Jakob Villareal


Currently studying for a B.A. in English at A&M San Antonio and Majoring in Writing & Rhetoric, Jakob is a key player in securing additional funding for Centro’s many projects and initiatives. Jakob acts as a matchmaking service for Centro’s projects and Initiatives. Using his intimate knowledge of our goals and ideals, he seeks to find the perfect match of project and potential funding organization. When he’s not busy fundraising Jakob also fills the roll of Game Master, host the team’s various gettogethers and keeping the party going with games galore. He spends his free time painting miniatures, and is an avid Dungeons and Dragons & Table Top RPG enthusiast.

JanIe Garza


Janie is a native of Corpus Christi, TX and has made San Antonio her home since 2012. Her 15+ years’ experience allows her to serve a broad range of functions that allow the organization to operate efficiently, including, accounts receivable/payable, record management, information technology, office management, and assisting with human resources. Outside of the office she enjoys spending time with her family, visiting local art museums, and enjoying a German beer in Southtown.

Michael Cirlos


Michael began his studies and volunteer work at Webster University Thailand with a focus on international relations and Buddhism. After returning to San Antonio and graduating from UTSA, Michael began photographing and telling the stories of people in Downtown San Antonio to help connect and increase awareness of our vibrant urban culture. Michael’s work has appeared in several news media organizations, and has produced digital content for small- and large-scale marketing campaigns for Red Bull, COSA Department of Arts and Culture, World Heritage Office, National Park Service, and others. Michael is a former Pecha Kucha San Antonio Speaker, best-selling author at Trinity University Press, entrepreneur, and adventurer.

Sarah Esserlieu


Sarah is a passionate urbanist who has spent the majority of her career on downtown revitalization efforts. Downtown is the best part of any city where you can find the finest history, culture, life, and beauty. Sarah has a Master of Science in Urban and Regional Planning from the University of Texas at San Antonio and a Bachelor of Arts in International Studies from the University of California, San DiegoSarah enjoys visiting small local businesses, enjoying foodie culture, cooking, hiking, and visiting the cities of the world. 



Kandice is a Sunnyvale, CA native and has made San Antonio her home since 2014She graduated from University of Argosy in 2016 with a Bachelor of Science in Accounting and continued to complete her Master’s in Business Administration from University of Phoenix 2020. She has worked in downtown San Antonio for years, bringing 15+ years of accounting experience to the organization and has been tasked with promoting and developing the city’s urban core. When not at the office, she enjoys spending time with her family and friends, managing her family’s businesses, and enjoys cooking and baking.  

The only way to do great work is to love what you do.” – Steve Jobs 


Membership Level
E-mail Address
Organization Name