 In this presentation, we will take a look at multiple choice questions related to receivables. First question. The person who signs a note receivable is a maker, b payee, c holder, d receiver, e owner. We'll read through this again and see if we can cross off some options with the process of elimination. The person who signs a note receivable is... Now if we look at a note receivable, you might first start thinking, well maybe both parties there should be two people signing the note receivable. But typically it's only required often times for one individual to sign the note receivable. And for the reasoning of that, we need to know that the note receivable is basically kind of like a promise. So a note receivable is an individual promising to pay in the future at some point. So we can imagine if we have a debt that is due and we say, well I'm not going to pay you now but I'll write this little note here and give a formal note telling you that I will pay you in the future. That's what's going on here. So who's going to be the person who signs it, the one who's making it? So if we look at this, a is the maker. And so that sounds good, right? The maker, it seems like a technical term. You might not hear or think of the maker of the note but that's going to be a technical term typically that looks like a good term to use. That's what it's probably going to be. B is going to be the payee. Now the difference between the payee and the payor is a little bit confusing. We just have to know the terminology payee and then the payor. The payor is going to be the one that eventually pays the payment at the end of the note term. And then the payee is going to be the one that's going to be receiving it. So the payee may sign the note but not really required to sign the note. The one who's making the promise to pay is going to be the one that needs to sign. That's going to be the payor. The holder of the note. The holder of the note is probably going to be the one that is going to get paid at the end of payee is the one that's going to hold the note. And again, they're not the one that really needs to sign it. The one that needs to sign is the one making the promise that is then giving the note to the holder that will then be able to use it for collection at the future. The receiver. I'm not sure that's exactly a technical term there. The receiver of the note, I think, but that sounds more even if it were more of the holder of the note. And again, the holder of the note is not the individual that is signing the note per say or is required to sign it, the one that is making it is. And then the owner, it's not really an owner of a note, right? So the note doesn't, you know, you could say that the holder has possession of a note, but I don't think that term really applies here. So it looks like the maker is what we are left with. So the person who signs a note receivable is the maker of the note receivable. Next question. A credit sale results in a debit to accounts receivable account in the general ledger and in the customer accounts in the customer's account in the accounts receivable subsidiary ledger. B credit to the accounts receivable account in the general ledger and to the customer's account in the accounts receivable subsidiary ledger. C a debit in the accounts receivable account in the general ledger and a credit to the customer's account in the accounts receivable subsidiary ledger. D a credit to the accounts receivable account in the general ledger and a debit to the customer's account in the accounts receivable subsidiary ledger and e a credit to the sales and a credit to the customer's account in the accounts receivable subsidiary ledger. Okay, so one more time we'll see if we can go through this with the process of elimination. A credit sale results in now this one since it actually has a journal entry we might first want to just record the journal entry I would I would say write it down it doesn't have a dollar amount you may say that's okay we can still write down what the debit and credit would be and that would typically a credit sale we made a sale and we didn't get cash we got AR accounts receivable so I can just put a dollar sign or something for the dollar amount or just put an amount of a hundred or something like that to show us that that represents some type of amount we don't know they didn't give us that that's okay and then the credit's going to go to something like income or revenue or sales whatever the income account is so that's the normal journal entry now they're talking about this subsidiary ledger type thing and remember that that really is going to be supporting backing up the accounts receivable accounts you got the accounts receivable accounts and then some type of subsidiary ledger which will give us the same information by order of customer so a then says a debit to the accounts receivable that looks good account and the general ledger this journal entry is going to be posted to the GL the general ledger and a customer accounts in the accounts receivable subsidiary ledger so that would be also a debit to the subsidiary ledger and that sounds pretty good because that's really what's happening here we're debiting both the general ledger and the subsidiary ledger let's look through the rest of them though B says a credit to the accounts receivable account in the general ledger a credit and we're debiting the general ledger for accounts receivable so that's why that one's not right C says a debit to the accounts receivable in the general ledger so a debit to the accounts receivable that looks good and a credit to the customer's account in the accounts receivable subsidiary ledger now we wouldn't be crediting the subsidiary ledger we're basically doing the same thing too at this journal entry we are in essence posting the same AR debit both to the GL general ledger and to the subsidiary ledger the subsidiary ledger being the same thing as the general ledger except that it's ordered in a different order rather than being just in order by date it being ordered first by a customer so then D says a credit to the accounts receivable account and that's not correct we're not crediting we're debiting the accounts receivable and E says a credit to sales and a credit to the customer account in the accounts receivable subsidiary ledger we will credit income or sales whatever that account is sales but we're going to debit accounts receivable which in essence is the subsidiary ledger and the GL ledger so we're not going to credit the accounts receivable accounts that's why that is incorrect so a looks like our correct answer once again a credit sale results in a a debit to the accounts receivable account in the general ledger and a customer customers account in the accounts receivable subsidiary ledger next question a promissory note is a investment for the maker be a written promise to pay a specified amount of money at a certain date see an asset to the maker D an installment receivable E can never be used in payment of an accounts receivable so we'll go through the process of elimination question one more time a promissory note is a an investment to the maker you may have a question who the maker is so I'll leave that one for now I mean you could think of a note as a kind of investment be you says a written promise to pay a specific amount of money at a certain date and a promissory note that sounds pretty good it sounds like a pretty good definition and then see says an asset to the maker so once again we've got this maker term here so let's let's leave that one for now D says an installment receivable and not necessarily an installment type sale unless it says it was an installment so I'm going to cross that E says a can never be used in payment of accounts receivable and it's possible actually to do that we could say okay we can't pay you the accounts receivable how about we sign a note receivable and they might accept that because the note receivable would then charge interest so that might be we could actually you know using note receivable as payment for an accounts receivable so we're left with a b and c so a promissory note is a says an investment to the maker and c says an asset to the maker now note that those two kind of cancel each other out in some ways they can't both be correct and even if we didn't know what the maker is if something was both an investment and an asset they would both be you know if it was an investment it would have to be an asset typically so that's one reason just looking at the multiple choice format we could say hmm those two don't look right and we can kind of cross those out now who is the maker that's the one that is actually signing the note so the maker is actually the one that is making the promise of the note so that's usually the customer in other words now that's a little deceiving of a term because oftentimes the person who you know writes the the note will be the the business because that's what they do they make a standard note but you can think of the note as a promise being made by the maker the one the customer who's promising to pay in the future and therefore they're the one that's going to sign it as if they made it as if they wrote up the note said i'm going to promise you to pay whatever i owe you in the note and sign it and give it to the other individual that being the business so the maker then it's not an investment to them it's kind of like a liability to them and so that's not correct here and that's why it's not an asset to the maker it could be an asset to the receiver or the holder of the note so b looks like our correct answer a written promise to pay a specific amount of money at a certain date so once again a promissory note is b a written promise to pay a specific amount of money at a certain date