A promissory note received from a customer in exchange for an account receivable is recorded by the payee as:
A) A note payable.
B) A note receivable.
C) An account receivable.
D) A cash equivalent.
E) A short-term investment.

Question

Quizplus · Accepted Answer

A promissory note received from a customer is considered a promise to pay in the future, making it a note receivable. It is not a note payable because the payee is not the one making the promise to pay. It is also not an account receivable anymore because the customer has promised to pay through the note. It is not a cash equivalent because it is not readily convertible into cash, and it is not a short-term investment because it is not made with the intention of earning a return.

A Promissory Note Received from a Customer in Exchange for an Account