CZC1
VYC1- Notes
Chapter 16
The law covering negotiable instruments is part of the Uniform Commercial Code (UCC).
Negotiable Instrument is a financial document, containing a promise or order to pay, that meets requirements of the UCC in order to be transferable to another party.
Must be in writing and be signed by maker or drawer
Contain an unconditional promise or order to pay a definite amount of money
Be payable on demand or at a future time that is fixed or can be determined
Be payable to a specific person or bearer
Clearly name or identify the drawee if addressed to a drawee
Examples of a negotiable instrument would be checks or a promissory note.
Promissory note may be either notes payable or notes receivable
Promissory note is a written promise to pay a certain amount of money at a specific future time
Interest = Principal X Rate X Time
Note Payable is a liability that represents a written promise by the maker of the note to pay another party a specified amount at a specified future date
Discounting is paying the interest in advance from the principal on a note payable
Notes due within one year are a current liability
Notes due in more than a year are long-term liabilities
Notes Receivable is an asset
If Notes Receivable mature within a year they are current assets, more than a year long-term assets
Notes Receivable-Discounted is a contra account and appears as a deduction from Notes Receivable
Discounting notes is shown as an interest expense
Negotiable Instruments include drafts and acceptances
Draft is a written order that requires one party to pay a stated sum of money to another party
Examples of draft, a bank draft or cashier’s check
Commercial drafts are used for special shipment and collection situations
Sight draft is a commercial draft that is payable on presentation
Bill of Lading, used on customers with poor or no credit. It is taken to a bank near the customer, where they go to pay before their goods are received.
Time Draft is payable during a
Chapter 16
The law covering negotiable instruments is part of the Uniform Commercial Code (UCC).
Negotiable Instrument is a financial document, containing a promise or order to pay, that meets requirements of the UCC in order to be transferable to another party.
Must be in writing and be signed by maker or drawer
Contain an unconditional promise or order to pay a definite amount of money
Be payable on demand or at a future time that is fixed or can be determined
Be payable to a specific person or bearer
Clearly name or identify the drawee if addressed to a drawee
Examples of a negotiable instrument would be checks or a promissory note.
Promissory note may be either notes payable or notes receivable
Promissory note is a written promise to pay a certain amount of money at a specific future time
Interest = Principal X Rate X Time
Note Payable is a liability that represents a written promise by the maker of the note to pay another party a specified amount at a specified future date
Discounting is paying the interest in advance from the principal on a note payable
Notes due within one year are a current liability
Notes due in more than a year are long-term liabilities
Notes Receivable is an asset
If Notes Receivable mature within a year they are current assets, more than a year long-term assets
Notes Receivable-Discounted is a contra account and appears as a deduction from Notes Receivable
Discounting notes is shown as an interest expense
Negotiable Instruments include drafts and acceptances
Draft is a written order that requires one party to pay a stated sum of money to another party
Examples of draft, a bank draft or cashier’s check
Commercial drafts are used for special shipment and collection situations
Sight draft is a commercial draft that is payable on presentation
Bill of Lading, used on customers with poor or no credit. It is taken to a bank near the customer, where they go to pay before their goods are received.
Time Draft is payable during a