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Simple English definitions for legal terms
note receivable
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A quick definition of note receivable:
A note receivable is a type of account that shows how much money someone owes you. It's like when you lend your friend money and they promise to pay you back later. The promise they make is called a note, and the amount they owe you is the note receivable. It's important to keep track of note receivables so you know who owes you money and when they need to pay you back.A more thorough explanation:
Definition: A note receivable is an account reflecting a balance owed by a debtor; a debt owed by a customer to an enterprise for goods or services.
Example: A company sells goods to a customer on credit and creates a note receivable for the amount owed. The customer is expected to pay the debt at a later date, usually with interest.
Explanation: The example illustrates how a note receivable is created when a customer purchases goods or services on credit. The company expects to receive payment at a later date and records the debt as a note receivable. The customer is obligated to pay the debt, and the company can use the note receivable as collateral for a loan or sell it to a third party for cash.