Notes Receivable

Below is an example of how to process the initial receivable and subsequent invoices for a Note Receivable, Loan, or any other pre-existing or lump sum receivable that is invoiced in regular installments. Assume that you are issuing $10,000.00 in cash for which you are receiving a signed note. Your customer agrees to repay the note in monthly installments of $100.00. Part of each monthly payment applies toward the principal of the note and part is an interest payment. For this example, assume the first monthly installment pays $10.00 of the note principal and $90.00 of interest.

The General Ledger Journal Entry for the Note posts as follows:

The invoice as entered in Accounts Receivable looks like this:

Invoice Subtotal: $ 100.00 Invoice Total: $ 100.00

With line items of:

Principal: $ 10.00 Interest: $ 90.00

This posts to general Ledger as follows: