Sometimes, a customer will make a purchase and ask the company to pay off said-purchase overtime or in the future with, essentially, a loan.
In these situations, the customer and company may agree upon a note receivable!
A note receivable is a tool customers & companies can use to enable the customer to pay off a purchase made on account overtime (with interest).
Consider the following situation:
Question: On May 1st, 2022, Hats LLC provided a mass order for their favorite customer, Samantha. To pay off the mass order, they both agree upon a $1,000, 12% annual interest note due in 9 months.
What journal entry should Hats LLC make on...
There’s 3 main stages to a note receivable that we’ll consider, let’s walk through each!
The journal entry recording the creation of the note on May 1st, 2022 would look like this: