The receivable that is usually evidenced by a formal instrument of credit is a(n)
A) trade receivable.
B) note receivable.
C) accounts receivable.
D) income tax receivable.

Question

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A note receivable is a written promise to pay a specific amount of money at a future date. It is typically supported by a formal instrument of credit and includes specific payment terms such as interest rate and maturity date. Accounts receivable, on the other hand, are usually informal in nature and involve an ongoing business relationship between the seller and the buyer. Trade receivables refer to the money owed by customers for goods and services sold on credit, which can include both accounts and notes receivable. Income tax receivable is a type of asset that arises when a company has overpaid its taxes and is owed a refund from the government.

The Receivable That Is Usually Evidenced by a Formal Instrument