James borrowed $550 from Tracy.James promised in writing that he would repay the money to Tracy on May 13,200x.At the time of the loan,Tracy records the transaction as a(n):
A)Accounts Receivable.
B)Accounts Payable.
C)Promissory Note Receivable.
D)Promissory Note Payable.

Question

Quizplus · Accepted Answer

A) Accounts Receivable is a term used when a company sells goods or services to another company and has not yet received payment. This does not apply to the situation described.
B) Accounts Payable is a term used when a company owes money to another company for goods or services received. This also does not apply to the situation described.
C) Promissory Note Receivable is the correct choice because a promissory note is a written promise to pay back a loan, and Tracy is the party receiving the promise to pay. 
D) Promissory Note Payable would be used if Tracy had borrowed money and promised to repay it to James.

James Borrowed $550 from Tracy