Question

Cart Company accepted a note receivable from a credit customer who failed to pay their $2,000 Accounts Receivable balance. The customer signed a promissory note which was accepted for 45 days at 5% interest. At the end of 45 days, the customer pays the balance on Notes Payable and interest. Assuming a 360 day year, what is the journal entry for receiving the payment of the note and interest

Answer 1

The interest income account is debited and the cash account is credited in the journal entry for interest on a note receivable.

What are Notes payable?

Long-term obligations known as notes payable represent the sums that a firm owes its financiers, including banks and other financial institutions as well as other funding sources like friends and family. They are considered long-term since they are due after a year, though typically within five years.

Thus, the journal entry of interest on notes payable can be referred to in the below image.

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