A note receivable is an account that indicates the amount of money owed to you by someone. It’s similar to when you lend money to a friend and they agree to repay you later. This agreement is called a note, and the amount they owe you is the note receivable. It’s crucial to monitor note receivables to keep track of who owes you money and when they are expected to repay it.
A note receivable is a record of a debtor’s outstanding balance, representing a debt owed by a customer to a business for goods or services. For instance, if a company sells goods to a customer on credit, it creates a note receivable for the amount owed, which the customer is expected to pay at a later date, usually with interest. This example demonstrates how a note receivable is established when a customer buys goods or services on credit, with the company anticipating payment at a later date and recording the debt as a note receivable. The customer is responsible for paying the debt, and the company can use the note receivable as collateral for a loan or sell it to a third party for cash.
A note receivable is a written promise to receive a specific amount of money on a future date, usually with interest.
While both represent money owed to a company, an accounts receivable is typically a short-term debt owed by a customer for goods or services already provided, whereas a note receivable is a formal agreement for a longer-term loan.
A note receivable typically includes the principal amount, the interest rate, the maturity date, and any other terms and conditions agreed upon by the parties involved.
Yes, a note receivable can be transferred or sold to another party through a process called assignment. However, the terms of the note must allow for such transferability.
If the debtor fails to make the required payments or violates any terms of the note, the creditor can take legal action to recover the outstanding amount, including filing a lawsuit or seeking collection through other means.
Yes, the parties involved can agree to modify or renegotiate the terms of a note receivable. However, any changes should be documented in writing and signed by all parties to avoid future disputes.
Yes, a note receivable can be forgiven or canceled if both parties agree to do so. However, it is important to consult with a legal professional to ensure that the cancellation is properly documented and does not have any unintended consequences.
In some cases, a note receivable can be discharged in bankruptcy if the debtor successfully completes the bankruptcy process and meets the requirements for discharge. However, certain types of debts, such as those obtained through fraud or misrepresentation, may not be dischargeable.
Yes, a note receivable can be secured by collateral, such as real estate or personal property. This provides the creditor with additional protection in case of default, as they can seize and sell the collateral to recover the outstanding amount.
A note receivable should be recorded as an asset on the balance sheet, typically under the “Notes Receivable” or “Loans Receivable” category. The interest earned on the note should be recorded as interest income over the term of the note.
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 17th April 2024.
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