1.
Both these are appeared in the asset side of a balance sheet; but these have some differences.
Differences are as below:
No. |
Accounts receivable |
Notes receivable |
1. |
This arises because of credit sale. |
This arises because of extending credit to customers. |
2. |
This is always for short-term purpose; such as 30 or 45 days credit to customers. |
This may be short-term or long-term purpose; such as note receivable for more than 1 year. |
3. |
Since this is short-term, it always appears under Current Assets. |
Long-term Notes appear under Non-current assets. |
4. |
It doesn’t carry interest, since the credit period is granted by the firm itself. |
Since this is for extended period of credit, interest is levied on the Notes amount. |
5. |
There may be a provision of bad debts if there is doubt to be collected. |
There is no such doubt, since legal action could be taken if not collected. |
6. |
There may be written-off entry. |
No such entry is required here. |
> Review Questions What is the difference between accounts receivable and notes receivable 2. List some...
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