Notes Receivable definitions Flashcards
Notes Receivable definitions
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Notes Receivable Formal written promises for amounts to be received, typically including principal, interest rate, and maturity date, and classified as assets. Principal Original amount of money loaned or owed, upon which interest is calculated and repaid at maturity. Interest Rate Annual percentage used to determine the cost of borrowing or the return on lending the principal amount. Maturity Date Specific calendar day when the total principal and accrued interest must be paid in full to the lender. Time Factor Proportion of a year for which interest is calculated, often expressed as days over 360 or months over 12. Face Value Stated value of a note, representing the principal amount to be repaid at maturity. Interest Revenue Income earned by a lender from charging interest on notes receivable over time. Accounts Receivable Amounts owed by customers from credit sales, typically less formal and non-interest bearing compared to notes receivable. Accrued Interest Interest that has been earned but not yet received or recorded in cash by the end of a reporting period. Interest Receivable Asset account representing interest earned but not yet collected on outstanding notes receivable. Adjusting Entry Accounting record made at period end to recognize earned interest revenue or accrued interest not yet received. Disposal Process of removing a note receivable from the books upon collection of principal and interest at maturity. Current Asset Resource expected to be converted to cash or used within one year, including most notes receivable. Journal Entry Formal accounting record documenting the acquisition, adjustment, or settlement of notes receivable. Annualization Adjustment of interest calculations to reflect the actual period a note is outstanding, based on a yearly rate.
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