CHAPTER 16: NOTES PAYABLE
Bank draft – a check written by a bank that orders another bank to pay the stated amount to a specific party
Banker’s
... [Show More] year – 360 day period used to calculate interest on a note
Bill of lading – business document that lists goods accepted for transportation
Cashier’s check – draft on the issuing bank’s own funds
Commercial draft – note issued by one party that orders another party to pay a specified sum on a specified date
Contingent liability – an item that can become a liability if certain things happen
Discounting – deducting the interest from the principal on a note payable or receivable in advance
Draft – a written order that requires one party (person or business) to pay a stated sum of money to another party
Face value – an amount of money indicated to be paid, exclusive of interest or discounts
Interest – fee charged for the use of money
Maturity value – total amount (principal plus interest) payable when a note comes due
Negotiable instrument – financial document containing a promise or order to pay that meets all requirements of the Uniform Commercial Code in order to be transferable to another party
Note payable – a liability representing a written promise by the maker of the note (the debtor) to pay another party (the creditor) a specified amount at a specified future date
Note receivable – an asset representing a written promise by another party (the debtor) to pay the note holder (the creditor) a specified amount at a specified future date
Principal – amount shown on face of a note
Promissory note – written promise to pay a certain amount of money at a specific future time
Sight draft – a commercial draft that is payable on presentation
Time draft – commercial draft that is payable during a specified period of time
Trade acceptance – form of commercial time draft used in transactions involving the sale of goods
Interest = Principal x Rate x Time
On a note that has a principal amount of $4,000, interest rate of 8% per annum, that has to be paid off in 90 days, the formula for interest would be 4,000 x 0.08 x 90/360. [Show Less]