The Journal Entry to Record a Note Received from a Customer

question 159

Multiple Choice

The journal entry to record a note received from a customer for the sale of services is:

• A)debit Note Receivable and credit Service Revenue.
• B)debit Service Revenue and credit Note Receivable.
• C)debit Note Payables and credit Note Receivable.
• D)debit Note Receivable and credit Accounts Receivable.

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Definitions:

Total Current Liabilities

These are obligations that a company is required to pay within one year or within the normal operating cycle.

Working Capital

The variance between a business's immediate assets and its short-term obligations, signalling its ability to meet short-term debts.

Current Ratio

A financial liquidity ratio that compares a company's current assets to its current liabilities.

Accounts Receivable Turnover

A financial ratio that measures how efficiently a company collects on its credit sales by comparing net credit sales with the average accounts receivable over a period.