Legal Definitions - note receivable

Definition: A note receivable is an account reflecting a balance owed by a debtor; a debt owed by a customer to an enterprise for goods or services.

Example: A company sells goods to a customer on credit and creates a note receivable for the amount owed. The customer is expected to pay the debt at a later date, usually with interest.

Explanation: The example illustrates how a note receivable is created when a customer purchases goods or services on credit. The company expects to receive payment at a later date and records the debt as a note receivable. The customer is obligated to pay the debt, and the company can use the note receivable as collateral for a loan or sell it to a third party for cash.