In accounting, when doing bank reconciliation, can you explain what a ‘note collected by bank’ exactly means?
I am not understanding what it means when a ‘note is collected’ by a bank and why it gets added to the company’s portion of the bank reconciliation.
Thanks! Sources please!!
It has to do with ‘Notes Receivable’ from customers. To provide a scenario, occasionally a problem customer’s past-due ‘Accounts Receivable’ account is changed to a ‘Note Receivable’ charging interest as well, if both parties agree to that solution. OK. Sometimes the company will receive payment of the note and interest directly, and other times the company’s bank will collect the note receivable. In the latter case, the bank will issue a credit memo to the company indicating that the cash balance per the bank has increased, so the company then needs to add the amount to its books during the reconciliation process.
I don’t have an internet source, this is just from my textbook:
‘Corporate Financial Accounting’ 9E – Warren & Reeve
Bank of Canada: The New $100 Note
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