Discount on notes receivable definition
/What is a Discount on Notes Receivable?
A discount on notes receivable arises when the present value of the payments to be received from a note are less than its face amount . The difference between the two values is the amount of the discount.
Accounting for a Discount on Notes Receivable
To account for the difference between the present value of the payments to be received from a note and its face amount, amortize it over the remaining life of the note. The offset to this entry goes to interest revenue . For the party discounting the note, the discount is incrementally recognized as interest expense over the remaining term of the note.
