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4 Notes Receivable 1

Notes Receivable are formal claims for payment arising from sales in business. They are measured at present value initially and at face value or amortized cost subsequently, depending on whether they are short-term or long-term, interest-bearing or non-interest bearing. Dishonored notes are transferred from notes receivable to accounts receivable, including any interest and charges due.

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Norie Jane Senon
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8 views1 page

4 Notes Receivable 1

Notes Receivable are formal claims for payment arising from sales in business. They are measured at present value initially and at face value or amortized cost subsequently, depending on whether they are short-term or long-term, interest-bearing or non-interest bearing. Dishonored notes are transferred from notes receivable to accounts receivable, including any interest and charges due.

Uploaded by

Norie Jane Senon
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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CHAPTER

BLUE NOTES
4 S
L
Notes Receivable are claims supported by formal promise to pay in the form of notes.
Note: Standing alone, notes receivable represents only claims arising from sale of merchandise or service in the ordinary course of
business.

Measurement
INITIAL SUBSEQUENT
Present Value

Short Term NR PV = Face Value Face Value


Long Term NR: Amortized Cost
Interest Bearing PV = Face Value AC = FV
(PV upon issuance)
Non-interest Bearing AC = PV + amortization of discount
PV = Discounted Value of future
or
cash flows using the effective
interest rate AC = FV - unamortized unearned
interest income

Dishonored Notes are matured and unpaid notes.

Treatment of Dishonored Notes


Dishonored noted shall be removed from the notes receivable account and transferred to accounts receivable at
an amount to include, if any interest and other charges.

Theory of Accounts Practical Accounting 1

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