CENTURY 21 ACCOUNTING © Thomson/South-Western LESSON 20-3 Notes Receivables: promissory notes that a business accepts from their customers.

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Presentation transcript:

CENTURY 21 ACCOUNTING © Thomson/South-Western LESSON 20-3 Notes Receivables: promissory notes that a business accepts from their customers

CENTURY 21 ACCOUNTING © Thomson/South-Western 2 LESSON 20-3 A current accounts customer may become an accounts note account. Therefore, we will move the amount from Accounts Receivable and place it in Notes Receivable

CENTURY 21 ACCOUNTING © Thomson/South-Western 3 LESSON 20-3 ACCEPTING A NOTE RECEIVABLE FROM A CUSTOMER 1 2 page 598 April 14. Accepted a 90-day, 8% note from Martin Sterling for an extension of time on his account, $3, Note Receivable No Debit to Notes Receivable 2.Credit to Accounts Receivable

CENTURY 21 ACCOUNTING © Thomson/South-Western 4 LESSON 20-3 We will charge interest on our Notes Receivable. This will become Interest Income, an “other” revenue account. We are not in business to be a bank, so this revenue is analyzed separately on the Income Statement.

CENTURY 21 ACCOUNTING © Thomson/South-Western 5 LESSON 20-3 COLLECTING PRINCIPAL AND INTEREST ON A NOTE RECEIVABLE page 599 July 13. Received cash for the maturity value of Note Receivable No. 9, a 90-day, 8% note: principal, $3,000.00, plus interest, $60.00; total, $3, Receipt No Write the date. 2.Write the account title. 5.On the next line, write the account title. 3.Write the receipt number. 6.Calculate and write the interest income amount. 4.Write the principal amount. 7.Write the maturity value.

CENTURY 21 ACCOUNTING © Thomson/South-Western 6 LESSON 20-3 Just like we had “uncollectible” Accounts Receivable, we can also have uncollectible Notes Receivables. A note that is not paid on time is called a dishonored note. We will place this amount back into Accounts Receivable.

CENTURY 21 ACCOUNTING © Thomson/South-Western 7 LESSON 20-3 RECORDING A DISHONORED NOTE RECEIVABLE page 600 May 6. Jill Davis dishonored Note Receivable No. 12, a 90-day, 8% note, maturity value due today: principal, $600.00; interest, $12.00; total, $ Memorandum No Debit to Accounts Receivable 2.Credit to Notes Receivable 3.Credit to Interest Income

CENTURY 21 ACCOUNTING © Thomson/South-Western 8 LESSON 20-3 TERMS REVIEW notes receivable interest income dishonored note page 602

CENTURY 21 ACCOUNTING © Thomson/South-Western Using automated accounting, complete 20-5 You may work with a partner! 9 LESSON 20-3

CENTURY 21 ACCOUNTING © Thomson/South-Western 10 LESSON 20-3 Audit your Understanding 20-3 Work Together (Accounting Forms) 20-3 On Your Own (Accounting Forms) Cornell Notes 6.01

CENTURY 21 ACCOUNTING © Thomson/South-Western 11 LESSON 20-3 Homework Study VOCATS questions and Cornell Notes

CENTURY 21 ACCOUNTING © Thomson/South-Western 12 LESSON 20-3 Homework Study Cornell Notes….Test on Friday