On May 1, 2019, Mary Smith signed a $ 13 comma 000 promissory note with Continental Bank. The note is due in one year with 6 % interest. What journal entry should Continental Bank prepare on May 1, 2019?

Question

Eaton

Business

17 June, 17:12

On May 1, 2019, Mary Smith signed a $ 13 comma 000 promissory note with Continental Bank. The note is due in one year with 6 % interest. What journal entry should Continental Bank prepare on May 1, 2019?

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Answers (1)

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Dangelo Moran · Answer 1

The journal entry for the given transaction is - "debit notes receivable for $13,000 and credit cash for $13,000".

Solution:

Journal entry can be stated as the track of the transactions. It provides audit trials. Journal entry rule for the three types of accounts are as follows,

Personal account: This includes the accounts that are related to a business or an individual. Here we have to debit the receiver and credit the giver. Real account: This account includes the tangible and intangible assets. Here we have to debit what comes in and credit what goes out. Nominal account: This comprises the expenses or losses and the income or gains. We have to debit the expenses and credit the income.

Likewise here in the given question, we have to debit the notes that are receivable and credit the cash.