25 terms

Accounting Chapter 17

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accrued interest on notes receivable
Interest revenue that has been earned but not yet received.
bank discount (note payable)
The amount that the bank deducts from the face of a note.
bank discount (note receivable)
An interest fee that the bank charges for the time between the date of discounting and the due date of the note.
contingent liability
A potential liability that may become a real liability depending on future events. In the case of a note discounted at a bank, the business that discounted the note must pay the maturity value and any bank fees if the maker of the note does not pay it at maturity.
contra-liability account
An account with a debit balance that is deducted from the related liability account.
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discount period
The time between the date of discounting and the due date of the note.
discounting (note payable)
The procedure, which banks often use, of deducting interest in advance when making a loan.
discounting a note receivable
Transferring a note receivable to a bank for cash.
dishonored
A note which the maker does not pay or renew at maturity.
effective rate
The interest amount paid divided by the proceeds received on a discounted note.
interest-bearing note
A note with an explicit interest rate stated on the face of the note.
maker
The person or business agreeing to make the payment on a note.
maturity value
The principal of the note plus interest equals the maturity value of the note.
non-interest-bearing note
A note on which no rate of interest is specified, although the note does include an interest component.
notes payable register
A detailed auxiliary record of notes payable.
notes receivable register
A detailed auxiliary record of notes receivable.
payee
The specific person or business to whom a note is payable.
principal of the note
The face amount of the note that the maker promises to pay at maturity. The principal is the base on which the interest is calculated.
proceeds (note payable)
The net amount received from the bank.
proceeds (note receivable)
The difference between the maturity value of the note and the bank discount. This is the amount of cash received by the business discounting the note.
promissory note
A written promise to pay a specific sum at a definite future date.
rate of interest
The rate at which interest is charged, usually expressed as an annual percentage, but in some cases a monthly rate is quoted.
term of the note
The months or days from the date of issue to the date of maturity.
time
The term of the note stated as a fraction of a year.