Select all that applyThe correct journal entry for the collection of a note receivable includes a ______. Assume the collection of interest is recorded separately. (Select all that apply.)Multiple select question.debit to Cashcredit to Notes Receivabledebit to Notes Receivablecredit to Notes Payablecredit to Cashdebit to Notes Payable
Question
Select all that applyThe correct journal entry for the collection of a note receivable includes a ______. Assume the collection of interest is recorded separately. (Select all that apply.)Multiple select question.debit to Cashcredit to Notes Receivabledebit to Notes Receivablecredit to Notes Payablecredit to Cashdebit to Notes Payable
Solution
The correct journal entry for the collection of a note receivable includes a debit to Cash and a credit to Notes Receivable.
Here's why:
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Debit to Cash: When you collect a note receivable, you are increasing your cash. In accounting, increases in asset accounts like cash are recorded as debits.
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Credit to Notes Receivable: Notes receivable is also an asset account. However, when you collect on a note receivable, you are decreasing this account because you are converting the note into cash. Decreases in asset accounts are recorded as credits.
The other options are not correct. You would not debit or credit Notes Payable because this is a liability account and is not affected by the collection of a note receivable. You would not credit Cash because this would indicate a decrease in cash, which is not the case when you collect on a note receivable.
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