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

Given the descriptions below, which statement is true regarding notes receivable?

Notes receivable are written promises to pay a specified amount of money at a future date.

Notes receivable do not earn interest for the holder.

Notes receivable are always due within 30 days of issuance.

Notes receivable are only used for sales of inventory.

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Verified step by step guidance

Understand the concept of notes receivable: Notes receivable are formal written promises from a debtor to pay a specified amount of money at a future date. They are often used in business transactions where payment terms are extended beyond the typical accounts receivable timeframe.

Clarify the earning of interest: Notes receivable typically earn interest for the holder, as they are formal agreements that often include an interest rate specified in the note. This distinguishes them from accounts receivable, which generally do not accrue interest.

Examine the due date: Notes receivable are not always due within 30 days of issuance. The maturity date of a note is determined by the terms agreed upon by the parties involved, and it can range from short-term (less than a year) to long-term (more than a year).

Evaluate the usage of notes receivable: Notes receivable are not exclusively used for sales of inventory. They can arise from various transactions, such as loans, extensions of credit, or settlements of accounts receivable.

Determine the correct statement: Based on the analysis above, the correct statement is that notes receivable are written promises to pay a specified amount of money at a future date. This aligns with the definition and characteristics of notes receivable.