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What is notes receivable?

Notes receivable is an asset of a company, bank or other organization that holds a written promissory note from another party. For example, if a company lends one of its suppliers $10,000 and the supplier signs a written promise to repay the amount, the company will enter the amount in its asset account Notes Receivable. The supplier will also enter the amount in its liability account Notes Payable.

The portion of the notes receivable which is to be received within one year of the balance sheet date is reported in the current asset section of the lender's balance sheet. The remaining portion of the notes receivable will be reported in the noncurrent asset section Investments.