Question

On July 9, Mifflin Company receives a $10,400, 90-day, 8% note from customer Payton Summers as payment on account. What entry should be made on July 9 to record receipt of the note

Answer 1

Answer: Debit Notes Receivable $10,400; credit Accounts Receivable $10,400.

Explanation:

Mifflin Company is receiving the note back from Payton Summers which means that Payton Summers intends to settle their account. The correct entry to record therefore is one that closes off the Notes Receivable account by debiting it as it was on a credit balance.

The other account would be the Accounts Receivable account which would need to be credited by the amount owed to close off the account as it was on a debit balance as Accounts Receivables are when customers are still owing.