Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

7. Receivables and Investments

Types of Receivables

Financial Accounting

7. Receivables and Investments

Types of Receivables

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Multiple Choice

When referring to a note receivable or promissory note, which of the following best describes its main characteristic compared to an account receivable?

It is a written promise to pay a specific amount of money at a definite future date.

It does not accrue interest over time.

It is an informal agreement to pay for goods or services on credit.

It is always due within 30 days of issuance.

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Verified step by step guidance

Understand the concept of a note receivable: A note receivable is a formal, written promise to pay a specific amount of money at a definite future date. It is different from an account receivable, which is typically an informal agreement.

Compare the characteristics of a note receivable to the options provided in the problem. A note receivable is formal and includes specific terms, such as the amount to be paid and the due date.

Evaluate the option 'It is a written promise to pay a specific amount of money at a definite future date.' This aligns with the definition of a note receivable, as it specifies the formal nature and definite terms of payment.

Analyze the other options: 'It does not accrue interest over time' is incorrect because many notes receivable do accrue interest. 'It is an informal agreement to pay for goods or services on credit' describes an account receivable, not a note receivable. 'It is always due within 30 days of issuance' is incorrect because the due date depends on the terms of the note.

Conclude that the correct characteristic of a note receivable is 'It is a written promise to pay a specific amount of money at a definite future date,' as this best describes its main feature compared to an account receivable.