Name: Terry Wilhelmi
Topic: Accounting for Notes and Interest
By the end of today’s lesson, the student will be able to:
• define accounting terms related to notes and interest.
• identify accounting concepts and practices related to notes and interest.
• calculate interest and maturity dates for notes.
• analyze and record transactions for notes payable and notes receivable.
III. Anticipatory Set:
Sometimes a business receives more cash from sales than is needed to pay for purchases and expenses.
When this occurs, a business may deposit the extra cash in a bank or other financial institution for a short
At other times, the receipt of cash from sales does not occur at the same time and in sufficient amounts
to pay for needed purchases and expenses. When this occurs, a business needs to borrow additional cash or
make arrangements with its vendors to delay payment for a period of time.
IV. Learning Activities:
Promissory note (Note)- a written and signed promise to pay a sum of money at a specified time.
Promissory notes are used when money is borrowed for a period of time from a bank or other lending
agency. Sometimes a business requests a note from a customer who wants credit beyond the
usual time given for sales on account.
A note, like a check, can be endorsed and transferred to a bank in return for cash. Thus, the business
can get its money before the note is due.
Notes can also be useful in a court of law as written evidence of a debt.
Promissory Note on page 598 - terms, definitions, and illustration.
INTEREST on PROMISSORY NOTES
Interest - an amount paid for the use of money for a period of time.
Interest-bearing note - a promissory note that requires the payment of principal plus interest when the