NOTE RECEIVABLE Meaning and
Definition
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A note receivable refers to a written promise of payment received by a company or an individual from a borrower, usually in the form of a note or a written contract. It represents a legally enforceable agreement, where the borrower pledges to repay the principal amount borrowed along with any accrued interest within a specified period.
This financial instrument is frequently used by businesses when extending credit to customers, making loans, or investing in monetary assets. The note receivable outlines the terms and conditions of the loan or credit, including the repayment schedule, interest rate, and any penalties for default.
Notes receivable are classified as financial assets on the balance sheet of a company and are generally considered to be long-term assets, as the due date for payment usually extends beyond one year. They are recorded at their face value or the principal amount, which represents the amount of money that the borrower is obligated to repay.
Furthermore, notes receivable often generate interest income for the creditor over the life of the note. The interest income is typically recognized over time as it accrues based on the interest rate specified in the note. In cases where the interest is compounded, the interest can be added to the principal amount, thus increasing the total repayment amount.
Common Misspellings for NOTE RECEIVABLE
- bote receivable
- mote receivable
- jote receivable
- hote receivable
- nite receivable
- nkte receivable
- nlte receivable
- npte receivable
- n0te receivable
- n9te receivable
- nore receivable
- nofe receivable
- noge receivable
- noye receivable
- no6e receivable
- no5e receivable
- notw receivable
- nots receivable
- notd receivable
Etymology of NOTE RECEIVABLE
The word "note receivable" is a financial term used to refer to a written promise by a borrower to pay a specific amount of money to the lender, typically with an interest rate and a fixed maturity date.
The etymology of the term can be broken down as follows:
1. Note: The word "note" originated from the Latin word "nota", which means "mark" or "sign". In financial terms, a note represents a written acknowledgement of a debt owed by one party to another.
2. Receivable: The word "receivable" is derived from the Old French word "receivre", which means "to receive". In accounting and finance, the term refers to an asset that a company or individual expects to receive in the future, typically in the form of payment for goods or services provided.
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