Notes receivable are best described as:

Notes receivable are best described as:

• A. Money a business owes to others
• B. Money owed to a business
• C. A liability
• D. Cash on hand

Answer: (B)

Notes receivable are a written promise from someone else to pay your business a fixed amount by a future date, usually with interest. Because your business expects to receive cash, this item is an asset on the balance sheet—money owed to the business. It’s not money the business owes to others (that would be a liability) and it isn’t cash on hand since the cash hasn’t been received yet. Depending on when it’s due, it can be classified as a current asset or a long-term asset. In accounting, you record the note at its face value and recognize interest over time, then increase cash when it’s collected.

Notes receivable are a written promise from someone else to pay your business a fixed amount by a future date, usually with interest. Because your business expects to receive cash, this item is an asset on the balance sheet—money owed to the business. It’s not money the business owes to others (that would be a liability) and it isn’t cash on hand since the cash hasn’t been received yet. Depending on when it’s due, it can be classified as a current asset or a long-term asset. In accounting, you record the note at its face value and recognize interest over time, then increase cash when it’s collected.