19.03.2023 - 22:03

What is the difference between accounts receivable and notes receivable?

What is the difference between accounts receivable and notes receivable?

Answers (1)
  • Arche
    April 4, 2023 в 18:10

    Accounts receivable and notes receivable are both types of assets that represent money owed to a company, but they differ in their nature and how they are recorded.

    Accounts receivable refer to money owed by customers to a company for goods or services that have been delivered or rendered but not yet paid for. In other words, it is a short-term credit that a company extends to its customers. Accounts receivable are usually recorded in the company's balance sheet as current assets.

    On the other hand, notes receivable refer to a written promise to pay a certain sum of money at a specified date or on demand. Notes receivable are often used when a company lends money to a customer, either as part of a sale transaction or as a separate loan. Unlike accounts receivable, notes receivable are formalized and have a set payment schedule and interest rate. They are recorded in the balance sheet as a separate line item.

    In summary, accounts receivable represent short-term credit that a company extends to its customers, while notes receivable are formalized and structured loans with a set payment schedule and interest rate.

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