Financial assets - Notes receivable and interest
3 important questions on Financial assets - Notes receivable and interest
What can substitute for a receivable if a customer can't pay on time?
A promissory note, or note receivable (interest bearing)
How are notes receivable dealt with at period's end?
The accumulated interest must be recognized, so the proper amount is debited to Interest Receivable, and Interest Revenue is credited. Upon cash payment, it is important to credit the receivable as well as the new period's Interest Revenue.
What happens in case of a default on a Note Receivable?
The amount is returned to Accounts Receivable, along with the interest accrued.
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