Question

> Review Questions What is the difference between accounts receivable and notes receivable 2. List some common examples of other recriul 1 notes receivable

Answer 1

1.

Both these are appeared in the asset side of a balance sheet; but these have some differences.

Differences are as below:

No.	Accounts receivable	Notes receivable
1.	This arises because of credit sale.	This arises because of extending credit to customers.
2.	This is always for short-term purpose; such as 30 or 45 days credit to customers.	This may be short-term or long-term purpose; such as note receivable for more than 1 year.
3.	Since this is short-term, it always appears under Current Assets.	Long-term Notes appear under Non-current assets.
4.	It doesn’t carry interest, since the credit period is granted by the firm itself.	Since this is for extended period of credit, interest is levied on the Notes amount.
5.	There may be a provision of bad debts if there is doubt to be collected.	There is no such doubt, since legal action could be taken if not collected.
6.	There may be written-off entry.	No such entry is required here.