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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.