Asked by Gustavo Perez-Ramirez on Jun 30, 2024
Verified
Brooke Company grants James Decorating additional time to pay its past due account. James makes a written promise to pay Brooke the amount on a certain date. Brooke Company records this transaction as follows:
A) debit Notes Receivable; credit Accounts Receivable.
B) debit Cash; credit Accounts Receivable.
C) debit Accounts Receivable; credit Notes Receivable.
D) debit Accounts Payable; credit Notes Payable.
Notes Receivable
Written promises for amounts to be received by a company, usually including interest, classified as an asset on the balance sheet.
Accounts Receivable
Amounts owed to a company by customers for goods or services delivered or used but not yet paid for.
- Apprehend the consequences of promissory notes on accounts payable and receivable from an accounting perspective.
Verified Answer
ME
manolo espanaJul 03, 2024
Final Answer :
A
Explanation :
When a company converts an account receivable into a note receivable, it debits Notes Receivable (indicating it now has a formalized promise of payment) and credits Accounts Receivable (indicating the reduction in the open account balance).
Learning Objectives
- Apprehend the consequences of promissory notes on accounts payable and receivable from an accounting perspective.