Accounting 3
Chapter 23
Section 3
Accepting a Note Receivable from a
Customer
 Notes Receivable – Promissory note that a
business accepts from customers that are
usually paid within one year.
 Notes Receivable are classified as current
assets.
 These are asked for when a customer needs
more time to pay their account.
Accepting a Note Receivable from a
Customer
 When a Note Receivable is accepted, the
asset changes from an account receivable to
a note receivable.
 Notes Receivable is debited and Accounts
Receivable and the customer account is
credited.
 When a note receivable is your source
document, use NR in the Document No.
column of the General Journal.
 Example on next slide.
April 22. Accepted a 90-day, 18% note from Peter Ange for
an extension of time on his account, $1000.00. Note
Receivable No. 7.
General Journal
Date
Apr
Account Title
22 Notes Receivable
Accts Rec/ Peter Ange
Doc.
Post
No.
Ref.
NR7
Page ___
Debit
1 0 0 0
Credit
00
1 0 0 0 00
Collecting Principal and Interest on a
Note Receivable
 When a note receivable reaches its maturity
date, the payee receives the maturity value
from the maker.
 Interest Income – The interest earned on
money loaned.
 The interest earned on a note receivable is
credited to a revenue account titled Interest
Income.
 Example on next slide.
July 21. Received cash for the maturity value of Note
Receivable No. 7, a 90-day, 18% note: principal, $1000.00,
plus interest, $45.00; total, $1045.00. Receipt No. 484.
Cash Receipts Journal
Date
Account Title
Jl 21 Notes Receivable
Interest Income
Doc
Post
No.
R484
Ref.
GENERAL
DEBIT
CREDIT
1000.00
45.00
Page ___
Accts Rec.
Credit
Sales
Sales Tax Payable
Credit
Debit
Credit
Sales Dis.
Debit
Cash
Debit
1045.00
Recording a Dishonored Note
Receivable
 Dishonored Note – A note that is not paid
when due.
 The notes receivable account should only
show what will probably be collected.
 The amount of a dishonored note receivable
should be removed from the notes receivable
account.
Recording a Dishonored Note
Receivable
 The amount of the note plus interest income
earned on the note is still owed by the
customer.
 So, the total amount owed should be debited
to the accounts receivable account in the
general ledger.
 This amount should also be debited to the
customer’s account in the accounts
receivable ledger.
May 15. Pam Carter dishonored Note Receivable No. 9, a 90day, 18% note, maturity value due today: principal, $400.00;
interest, $18.00; total, $418.00. Memorandum No. 85.
General Journal
Date
Account Title
May 15 Accts Rec/ Pam Carter
Notes Receivable
Interest Income
Doc.
Post
No.
Ref.
M85
Page ___
Debit
Credit
4 1 8 00
4 0 0 00
1 8 00
Work Together p. 606 General Journal-this slide
Cash Receipts Journal-next slide
General Journal
Date
Feb
Account Title
2
Notes Receivable
Accts Rec/ Paul Gary
27 Accts Rec/ Kirk Adams
Doc.
Post
No.
Ref.
NR17
Page ___
Debit
1 8 0 0
Credit
00
1 8 0 0 00
M25
4
1 8 00
Notes Receivable
4 0 0 00
Interest Income
1 8 00
Assignment
Click the
arrow to
go to the
next slide
for the
journal on
the 18th.
Cash Receipts Journal
Date
Account Title
Fb 18 Notes Receivable
Interest Income
Doc
Post
No.
Ref.
67
GENERAL
DEBIT
CREDIT
Page ___
Accts Rec.
Credit
Sales
Credit
500.00
Sales Tax Payable
Debit
Credit
Sales Dis.
Debit
Cash
Debit
515.00
15.00
Click on
the arrow
to go back
to the
general
journal
entry for
the 27th.
Assignment
 Do Application 23-3 and 23-4 by hand.
 Turn them into Mrs. Middleton.
 Do 23-5 Mastery Problem on the computer.
 Turn in all pages to Mrs. Middleton.
 Take Chapter 23 test.
 Move on to chapter 24.